How can I shift my MegaOverdraft?

Jeffanchorman

Hello everyone!

I essentially live in my overdraft – it started as a student overdraft of £1,500 during most of my 3 years at university, which grew to £2,500 towards the end of my degree in 2007 as costs increased and my time to do part time jobs decreased.

I managed to pay back £1,000 once I found work, but a tricky year in 2010 when I was earning almost nothing meant I had to take it back to £2,500, where it's been for the last 4 years or so.

I've just heard Barclays will be charging me around £3 every day for my overdraft, which, you won't be surprised to hear, leaves me around £90 worse off every month.

My take-home paycheque is just under £1,600 a month, and I can afford to save £200-300 a month, (or pay £200-300 for loan/credit card repayments) – I have no other debts, other than my student loan. I don't have a credit card, and never have previously either. Currently Barclays won't give me a bank loan to pay off the overdraft.

So, what are my options for shifting this overdraft and not spending so much on charges or fees? I assume I could switch banks, but maybe not with an overdraft of that size? Or maybe a balance transfer card or loan is an option? Are Barclaycard likely to be an option? Or does the fact that Barclays have turned me down mean I'll be out of luck?

As you can tell, I don't really have a clue on what to do next. Please give me your bright ideas, tips, suggestions or details of great deals or accounts!

Tixy

Hi and welcome

You may well struggle to get accepted for a new overdraft of that size at a new bank.

In terms of a credit card a normal balance transfer card won't allow you to pay off a loan, you could only do that with one of the few cards that offers money transfers (a transfer to your bank account). This may be an option to consider.
That said being constantly in your overdraft will be seen as a negative to potential lenders so you may find it harder to get accepted for a new card, and cards offering 0% interest on money transfers are generally only offered to people with a good credit history whereas your sounds quite limited.

If you can pay off £300 a month then even with the charges being levied you could have it paid off within 8months, so do weigh up the costs of that compared to any other alternatives you consider.

You could look at the MSE eligibility soft search check for credit cards to see if you are likely to be accepted for a 0% offer. Look out for Virgin/MBNA cards on the list as these offer money transfers, the others don't. http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards?_ga=1.7782642.1500758169.1393580775#eligibility

A loan could be an option, although given the relatively small amount you want to borrow the representative rates tend to be higher than on larger loans.
You may want to look at nationwide - they have a soft search quotation facility, which means you can look at the chance of being accepted for a loan with them and how much that would cost, without them conducting a full credit search.

If you could get a loan with a bank over 1 year then it could work out quite a bit cheaper than keeping the debt in the overdraft and paying it off over the next few months.

sam_in_leeds

That was me 3 years ago (all be it with a £1500 OD)
In the end I asked them to reduce it by £100 a month for 12 months.They were surprisingly ok about it.

I tried the whole balance transfer thing on to a 0% card but in the end I made a mess of it and ended up running the OD back up (I lost my job in the height of recession etc).

Unless you can get a credit card with a 0% rate and pay off the OD and close it DON'T DO IT!

dimestorediamond

I am trying to do this too Jeff, and it's flipping hard! I didn't want to complicate matters by getting other accounts or cards, so I have opted for a simple ISA (Barclays too) and I just transfer the excess of my last pay into it on pay day. I am going to keep doing it until I have enough to take me to the next charge bracket (IE going from £1400, save £400 to get under a £1000 and have the charges half) then I will phone Barclays to lower the OD amount. Working for me so far!

ViolaLass

Why not just put the money into the OD as and when you have it? Nothing to be gained from saving it elsewhere first, is there?

dimestorediamond

ViolaLass wrote: »

Why not just put the money into the OD as and when you have it? Nothing to be gained from saving it elsewhere first, is there?

I dunno if this was for me, but my logic is that I won't spend it. I am just getting to grips with this whole paying off my debts thing, it's easier for me to manage. Also, interest in an ISA, so there is a little to be gained, even if its just a few pennies!

ViolaLass

But any interest you're earning on the savings will be dwarfed by interest being paid on the OD. Couldn't you also not spend it if it's in the OD?

steg90

Hi,
Same boat, 3k OD every month so bank would be charging me £90 with the new charges, almost tripling what it original was. I went into Barclays today, ran through my outgoings etc with a personal banker and put in a loan application - the personal banker put a lot of notes on the paper work stating how I'd got into the mess with 3k OD etc, anyway, I got the loan unbelievably on condition the OD was closed which was fine by me. I'm now in credit for first time in years and paying back £150.00 a month for two years for the loan. I will never ever get a OD again, once you are in, it is so difficult to get out. My credit rating is ok, I rent, I earn 31k a year, have a credit card debt and two years left on an AA loan. I have around £500.00 a month left after all bills, food, petrol is paid, this will now be £350.00 due to this new loan.

Can you not appeal the decision of Barclays not giving you the loan?

dimestorediamond

ViolaLass wrote: »

But any interest you're earning on the savings will be dwarfed by interest being paid on the OD. Couldn't you also not spend it if it's in the OD?

No, because the charges are the same whether there is £1100 on my overdraft or £1400. The charges are 75p a day on OD up to a £1000. £1.50 a day on £1000 upwards (I don't know up to how much, as I am on £1400 and no intention of increasing). So it does not matter how much it is if it is still over a £1000. Once I have £400, I will transfer it back and ring bank to lower it down, so I don't actually go over again.

If there were charges were dependent on every penny that I was into my OD, then of course I would leave the money in there to accrue itself.

ViolaLass

CRT86 wrote: »

No, because the charges are the same whether there is £1100 on my overdraft or £1400. The charges are 75p a day on OD up to a £1000. £1.50 a day on £1000 upwards (I don't know up to how much, as I am on £1400 and no intention of increasing). So it does not matter how much it is if it is still over a £1000. Once I have £400, I will transfer it back and ring bank to lower it down, so I don't actually go over again.

If there were charges were dependent on every penny that I was into my OD, then of course I would leave the money in there to accrue itself.

My mistake, I had assumed that there was an interest rate in there somewhere. I've never paid for an overdraft so the switch to fees instead of interest is something I clearly hadn't fully taken in. I see why you're doing what you're doing.

Jeffanchorman

Thanks everyone for your replies and suggestions.

I'm going to do an Experian credit check in a minute (using their free trial) and see what I can do to improve my credit rating – adding my name to the electoral role, etc.

I'm also going to visit Barclays in person, tell them that I want to remove my overdraft facility and I can pay them back £300 a month. Hopefully they can agree to do this and freeze the charges/interest while I pay it back. Worth going and asking, I reckon.