vicious circle of overdraft charges

tracey97

Hello
My son has a Lloyds overdraft of approx 2k. He arranged and used it when he had a reasonably good job a few years ago but circumstances changed and the job he has now doesnt pay as much,.
He is trying to pay it off but each month is getting charged between £50/£60 in fees so the debt isnt reducing. He asked LLoyds if he could take out a loan, pay off the overdraft and then at least the money he pays back to them each month is going towards paying off what he owes. They wouldnt allow him a loan, as he has the outstanding overdraft..and he will have the outstanding overdraft for ever at this rate. He also has a few credit cards

A lady I used to work with told me she once owed money on credit cards and somehow has managed to arrange to pay a certain amount per month which isnt breaking the bank. Its obviuosly not what the credit card company want as they occasionally phone her but she just tells them she is sticking to her side of the agreement. I dont work with her anymore so I cant ask her but how would my son be able to arrange something like this. Lloyds more or less said 'not a chance' - it seems that theyre happier to keep taking the charges each month.

DCFC79

He needs to put everything towards it.

Pixie5740

Your son could write to Lloyds and request that they freeze the interest and set up a payment plan. They might say yes but then again they might say no.

Since your done is struggling with debt repayments it might be worth him contacting Step Chsnge or CAP if he gets a no from Lloyds.

Gaz83

tracey97 wrote: »

Hello
My son has a Lloyds overdraft of approx 2k. He arranged and used it when he had a reasonably good job a few years ago but circumstances changed and the job he has now doesnt pay as much,.
He is trying to pay it off but each month is getting charged between £50/£60 in fees so the debt isnt reducing. He asked LLoyds if he could take out a loan, pay off the overdraft and then at least the money he pays back to them each month is going towards paying off what he owes. They wouldnt allow him a loan, as he has the outstanding overdraft..and he will have the outstanding overdraft for ever at this rate. He also has a few credit cards

A lady I used to work with told me she once owed money on credit cards and somehow has managed to arrange to pay a certain amount per month which isnt breaking the bank. Its obviuosly not what the credit card company want as they occasionally phone her but she just tells them she is sticking to her side of the agreement. I dont work with her anymore so I cant ask her but how would my son be able to arrange something like this. Lloyds more or less said 'not a chance' - it seems that theyre happier to keep taking the charges each month.

If he's getting charged £50-£60 a month in fees and the debt isn't reducing, then presumably he's not paying more than £50-£60 towards it?

What is his salary? Disposable income?

CLAPTON

tracey97 wrote: »

Hello
My son has a Lloyds overdraft of approx 2k. He arranged and used it when he had a reasonably good job a few years ago but circumstances changed and the job he has now doesnt pay as much,.
He is trying to pay it off but each month is getting charged between £50/£60 in fees so the debt isnt reducing. He asked LLoyds if he could take out a loan, pay off the overdraft and then at least the money he pays back to them each month is going towards paying off what he owes. They wouldnt allow him a loan, as he has the outstanding overdraft..and he will have the outstanding overdraft for ever at this rate. He also has a few credit cards

A lady I used to work with told me she once owed money on credit cards and somehow has managed to arrange to pay a certain amount per month which isnt breaking the bank. Its obviuosly not what the credit card company want as they occasionally phone her but she just tells them she is sticking to her side of the agreement. I dont work with her anymore so I cant ask her but how would my son be able to arrange something like this. Lloyds more or less said 'not a chance' - it seems that theyre happier to keep taking the charges each month.

need the facts to make an recommendations

what are the full details of his debts?
what fees and APRs and interest is he paying?
what is his salary?

he can of course default on the debts but that would make it difficult to get any credit for the next 6 years (which of course may be a good thing)
making arrangements to pay less or freeze interest is the equivalent of defaulting on the debt

tracey97

Thanks for your replies, I dont have much more info than I have originally posted but I will be seeing him in the next few days so I will try to get more details. Not much left in the way of disposable income as once paid things like rent , gas , counciil tax and food not much left as he does make regular payments to the credit cards. Works full time on minumum wage

YorkshireBoy

This is very worrying.


If he can only afford £60 a month, he'll need a loan over 42 months (that's 3 and a half years!) to clear the £2K debt if he manages to get one at 12.9% APR.


What's his agreed overdraft facility? ie is it more than £2K? If not, and I suspect it isn't due to the monthly cost, then some of the fees must be for unauthorised overdraft usage? That will seriously affect his ability to get any loan, let alone one with a half decent interest rate.

xHannahx

Consider Open an account with another bank, and send slightly more than the charges each month is what I would do. Means covering the charges and also paying a little to reduce.
Or after opening another account try and get a dmp style arrangement with them where they freeze interest and charges.
If he goes down such routes get an account away from lloyds and that group of banks, as if you have funds anywhere with lloyds they pull the money from anywhere within their groups to settle other debt.

robber2

xHannahx wrote: »

Or after opening another account try and get a dmp style arrangement with them where they freeze interest and charges.
If he goes down such routes get an account away from lloyds and that group of banks, as if you have funds anywhere with lloyds they pull the money from anywhere within their groups to settle other debt.

Are you really suggesting that someone in full time employment should trash his credit record for the next 6 years for the sake of a £2k debt ?

tracey97

Thanks for your replies. He is going to go into the bank on his next day off. he is paying the credit cards off, slowly, but at laast with them the amount is reducing. There is a chance he may be able to get a second job so hopefully can put everything to the overdraft.

I bank with lloyds and have never had a problem with them but they just seem unprepared to help with this. I'm wondering if when my son asked them, it was just the call centre staff he spoke to rather than someone in debt management. With what he's been paying each month he could ve paid a chunk of it off by now. Looking at his statement, its not gone over his limit so it not an unauthorised/unplanned spend. Its a usage fee and an interest fee.

This whole thing has come about because he moved in with a girlfriend, paid for everything with overdraft and cards (had a decent job at the time) then job circumstances changed - got royally ripped off by an employer and has ended up taking whatever jobs he could get albeit on minimum wage.

Anyway, thanks for your help

Candyapple

Your son needs to work out a budget/statement of affairs and throw everything he can spare towards the overdraft.

http://www.whatsthecost.com/snowball.aspx

If he contacts Lloyds to work out a repayment plan no doubt they will either default the account, and/or mark it on his credit files as an 'Arrangement to Pay' which are often worse than defaults as they can stay on your account for longer than 6 years.

For a £2k debt, it's just not worth it to trash his files especially if he plans to get a mortgage or obtain any form of credit in the near future. Far better to knuckle down now and live frugally for a while than that.