Sick of living in my large overdraft

AlwaysLearnin

You can get free credit file trials with the big agencies like experian, to check everything looks in order (cancel before end of trial though), and noddle is an ongoing free one (lesser used agency I believe)

You could look at things the nationwide flex direct account, which offers a free overdraft for 12 months (and you can potentially get more than one) if accepted, to save on interest.

http://www.nationwide.co.uk/current_account/flexdirect/default.htm

Careful with impact of applications (and possible non acceptance) on the credit file though.

You'd need to keep your discipline not to just increase the debt too.

One way or another though, the only way to get rid of the debt will be to make some savings somewhere to pay it off. Once cleared keep saving too (you'll be used to it by then), as some day you'll be glad of an emergency fund available

grumbler

AlwaysLearnin wrote: »

Careful with impact of applications (and possible non acceptance) on the credit file though.

Unlike application (credit search), 'non acceptance' is not reported and doesn't affect anything.

AlwaysLearnin

grumbler wrote: »

Unlike application (credit search), 'non acceptance' is not reported and doesn't affect anything.

Sorry, meant more as caution against trying for more if keep getting declined

YorkshireBoy

Smoggie69 wrote: »

I have a Santander current account which charges a fixed amount - £20 a month max, rather than a percentage. The money in the ISA will accrue interest whereas leaving it in the bank account will not. Therefore for me it makes sense. It all depends on how your bank charges interest on the overdraft.

You (obviously!) need to keep an eye on this.

I have the same facility at Santander, and have withdrawn the entire £10K facility to a savings account (actually offsetting my mortgage).

When I started it was free...then max £10 per month...now max £20 per month (as you say). I'm absolutely certain their next move (soon!) will be to remove the cap, meaning max £31 a month. At that point I'll repay them, because it'll no longer be worthwhile for me (borrowing at 3% to 'save' at 3.75% still makes sense on paper...but the damage it does to my credit rating won't be worth it for a 0.75% gain).

If you can't repay it all (can you?), then you'll probably end up having to change banks for one that charges debit interest only?

adypearson

I'd like to thank you all for your replies and suggestions, there were some great ideas there. I'd need to discuss them with my partner and see what the best move would be for us going forward. I like the idea of either opening a new account or ISA and put a set amount into it every month, then when it's built up to £4000 transfer it into my account just after my wages have gone in and we'd be back in the black. Then cancel the overdraft never to return to again.

R_P_W

Its simple. You know what you bring in every month. By spending a couple of hours going through recent bank statements you will know what you spend. Break that spend down into essentials and non essentials.

On the essentials shop around to make sure you are getting the best deal (Gas, electric etc).

On the non essentials decide which ones you can cut altogether and which ones you can reduce.

So you will then have a planned monthly spend. Lets say this is £2000 a month (everything you spend). I you bring home £2500 a month you will be reducing your OD by £500 a month - i.e. overdraft free in 9 months.

Personally I don't understand why people mess about opening new accounts etc.

YorkshireBoy

adypearson wrote: »

I like the idea of either opening a new account or ISA and put a set amount into it every month, then when it's built up to £4000 transfer it into my account just after my wages have gone in and we'd be back in the black.

You need to look at your account's overdraft charging structure to see if that's a sensible option, ie it makes absolutely no sense at all to save at 2% AER whilst incurring circa 19% EAR on the overdraft.

Daily or monthly overdraft use charges will cloud the figures, but generally (ie unless you've a Santander, Halifax, et al current account with 50p/£1 a day charges) you need to leave the cash in the current account to minimise the debit interest.

Then cancel the overdraft never to return to again.

Or, alternatively, find some willpower and keep it for dire emergencies!

[Deleted User]

You get paid £2500 a month and your O/D is £4200. In my mind this leaves one option...

Wait till payday, withdraw all of your salary and head to a caisno. Put everything on red. This way you will double your money, you'll be able to pay off the O/D and still have £800 left over! :-)

Now, it's a million to one shot (not really, more like 47% chance of success) but whoever head of a million to one shot that didn't work?!

As you may have guessed, I'm not being serious, it's just late and I can't sleep. Please don't do this. Or, if you do, at least let us known how it goes!

meer53

Opening another account may put the OP at risk of the overdraft being removed completely.

A better idea would be to do a SOA and see where they can cut back to reduce the overdraft gradually until it's repaid. If the OP has months where their salary is higher then normal, instead of spending it (which they can't really afford to do) put it away in a savings account until there is enough to repay the overdraft in full.

matttye

meer53 wrote: »

Opening another account may put the OP at risk of the overdraft being removed completely.

A better idea would be to do a SOA and see where they can cut back to reduce the overdraft gradually until it's repaid. If the OP has months where their salary is higher then normal, instead of spending it (which they can't really afford to do) put it away in a savings account until there is enough to repay the overdraft in full.

If the overdraft interest is more than what they'd earn by saving it (likely), it would make sense to just leave the money in the overdraft account.