Massive multiple overdraft debt

circoloco

Hello I am after some help and advice. A few years ago I moved away to study at university. Personal reasons meant I left during second year, however in my 20 months or so I did study, I stupidly racked up a lot of overdraft debt. Being young and naive I opened 4 student accounts and maxed out the overdrafts. This is around 6,000 of overdraft debt. Couple of years down the line I have been ignoring it and had this horrible thing hanging over my head that eventually it will no longer be interest free and need paying.
It is almost approaching that time and I am at a loss of what to do. I am only working part time earning anything from 500-900 in a month, with outgoings of around 400.
I have finally had my lightbulb moment and no longer want to hide it away.
I can afford to pay around 100 a month and probably more on some months but my hours and wage vary a lot so 100 is a reasonable minimum for now.

I looked at balance transfer credit cards but not sure if I would be accepted for one and if they would give me a credit limit so high. At least 2,500 is urgent as this is a Halifax account which will be charging me £60 a month from September for being overdrawn.

Apologies for the long post, and thanks in advance for any help.

~Beanie~

I doubt you will get a credit card with a balance that high if you are not earning much. A loan will probably be out of the question for the same reason.

What is your credit rating like? You could contact your creditors, explain your circumstances and see if they will agree to freeze interest/charges whilst you pay it off. That will trash your credit rating though.

circoloco

hi thanks for your advice. credit rating is poor defaulted on a store card a few years back which has damaged it. other than that never had any actual credit other than the overdrafts and phone bills which have always been paid on time.

on hold to halifax currently. is it common for them to freeze charges and set up repayment plans? if they refuse any suggestions for other options?

hohum

They probably won't freeze interest unless you are proven to be in financial difficulty I think? Unfortunately, despite your low income you're actually not in financial difficulty according to them yet. It's worth asking though, as a friend says, shy bairns get nowt!

I am assuming all of the overdrafts are currently 0% student accounts? And I assume you haven't told the banks that you've actually left your degree course?

So Halifax becomes a normal overdraft in September, what about the other overdrafts? Will they start charging interest, and when? This information might help you make a plan.

With defaults, low income and being at the max of your available credit, I think you can rule out a 0% balance transfer or any additional credit.

What you have to do is think of the overdrafts like any other debt - a credit card for example. You need to figure out what minimum payments are (the interest you may get charged) and then figure out if you can meet minimum payments. This will help in figuring out what options you can take.

Do you live in one of your overdrafts? You may want to look at moving to another bank account with NO overdraft facility. Then you will be able to start looking at paying the debts back. And cut up the cards for the accounts or leave them at home. You need to stop spending on any of the accounts if you still are.

And can I just take this moment to slap you upside the head for taking out FOUR overdrafts! There's young and stupid and there's taking the mick. But what's done is done and you are now dealing with the repercussions so well done. I'm on this forum because I'm dealing with a student overdraft 10 years on. I'll wave that at you as some kind of terrible story you tell children to frighten them into dealing with their debts as soon as they can

My feeling about your options is this:

get the info and do the sums. When will interest start to be charged? How much is it on each overdraft?

Can you cover these minimum payments based on your leanest month, covering what you need to live eg food, bills, rent, travel, annual bills?

If you can, what I'd do is do all my banking from a new account with no overdraft facility. I would move the money into there, and send payments each month to my overdrafts to cover interest. I would overpay the highest cost overdraft first - likely to be Halifax. This debt snowball calculator helps you figure out how much you will pay in interest, and how to overpay in order to pay less http://www.stoozing.com/calculator/snowball-calculator.php

if you can't, I'd still move everything to a new account with no overdraft, but you are probably going to need to do a debt management plan and possibly default on the overdrafts. This will screw your credit rating for 6 years, so basically put any ideas requiring credit on hold.

A third option would be to ask a relative if they are prepared to lend you money to pay off the Halifax overdraft, and for you to repay them (remember that your estimated £100 will also need to cover the interest on the other debts). I'd want to see a solid budget and repayment plan if I were anyone lending you money as I wouldn't be totally confident I would get my money back, given your history. So you'd need to do some convincing.

Finally I recommend doing an SOA to check your budget and that you can repay at the amount you estimate. And also (although I don't work for them) have a look at software called YNAB, It's not free but there is a 34 day free trial. I don't work for them but I saw a positive balance on my account for the first time in 8 years after three months of using it. Suffice to say, I like it! I have variable income too and find it works very well with that.

Sayva

What hohum said.. Basic Bank Account and YNAB would be especially useful in your situation. It's £30 on Steam, don't pay them direct (60USD). Maybe get the trial version and pray that it goes on sale within the trial period.

Also, same as holhum... I did a similar thing but came out the other side much better for it. Once you get through this you'll have a better understanding of money than most! You've learnt the hard way how banks and retailers screw you over and make a profit you. Once you've cleared the debt you'll be able to fight back and use that knowledge to profit from them!

Consider selling anything you can. If you've got an expensive mobile phone, even if it's on contract, sell it and get a cheap second hand one either unlocked or on the same network so you can use the same SIM. DVDs/Blu-Rays; even basic stuff like that - sell them even if you don't think you'll get much for them. Computer,branded clothes,car... sell and buy cheaper. Downgrade everything you can to the minimum that you actually need. Every penny counts at the moment and anything you make off ebay will be worth much, much more than the face value because they'll reduce the amount you're paying if compound interest, bank fees and late fees start hitting you!

Also, you are going to have to really hammer into yourself that you can no longer live beyond your means. You've been doing so ever since you opened that overdraft... not just the 20 months when you spent it all. You've been spending money that you should have been setting aside to pay off your overdraft. Whatever lifestyle you're used to; even if you think it's a poor one, its going to have to change dramatically... the more dramatically it changes the quicker you'll be able to get into a higher standard of living. Start browsing the forums on here relating to spending thriftily and learn all you can! Good luck!