#overdraft problems

SW132

So i've recently discovered my partner has an overdraft of £2200+ that she has been in for a few years without any attempt to pay it off and the monthly fees/charges now total around £100/month.
I'm trying to help her sort this out and just have a few questions.
Would it be better off to get a new loan to pay this off to avoid the ridiculous charges? Could i ask the bank to freeze the interest as my partner has been through financial hardship.
I've tried looking at 0% balance transfers however due to her low credit rating none were available so is there anything else that could help the situation?
Another point- she lives off her credit card, for example when she's paid she will clear the £400 on the card and then use that credit card for spending during the month..
Appreciate any help,
Many thanks.

sourcrates

Hi,

Best way to clear it is for her to get a new basic bank account, ask her old bank to freeze interest and charges, state financial difficulties as a reason for this, then just treat the old OD as just another debt to service.

Otherwise she will not be able to break the cycle.
I would not attempt to consolidate this debt.

midnitegremlin

One way to do it, I know Natwest will do this as they did with me, they can freeze interest and charges, and reduce the overdraft by £50 (or whatever) a month, so essentially a loan you are paying back at £50 a month with no interest.

Once it's paid off you won't have an overdraft option, but thats not a bad thing.

asparagus1968

if she is living in the OD and the CC she needs to look at her spending and make a budget, then hopefully they can be stopped and paid off.
Options above sound good, don't get a loan out to cover them!

midnitegremlin

asparagus1968 wrote: »

the CC she needs to look at her spending and make a budget, then hopefully they can be stopped and paid off.

I think what the OP was saying is that she does her spending on the CC and then pays it off in full. That's actually the best way to use them, I feel, assuming one has a steady income to cover the bill. But for sure, a budget is always good too!!

matchboxfull

Just be aware that if she makes an arrangement with the bank to freeze interest and/or reduce the overdraft each month this will be classed as an Arrangement to Pay on her credit file. This may not be an issue as it may be that neither of you is intending to apply for any credit or get a mortgage, but you need to be aware of it. Some people say that an AP marker is seen as worse than a default, but I am not so sure about that.

The trouble with consolidating is that it leaves credit available to re-spend. If it were me, however, I would be looking at getting a money transfer card or a loan to pay off the overdraft and then instantly self-reducing that overdraft down to £0 (or £50 or whatever is the lowest they offer).

When my husband and I were in debt we often shifted that debt between us by transferring it onto the best available card at the time whether it was in his name or mine. I'm not sure about the legal implications of that if we had split up or needed to get a formal debt arrangement, so I am not necessarily recommending it, but it worked for us at the time. To be honest, from the way you describe it doesn't sound like your finances are joint so I would scrap that idea.

Regarding the credit card, spending on it and then paying off in full is really good for one's credit file. I think what you mean by 'living in it', though, is that she's using next month's pay check to pay it off in full? The ideal situation would be to have the money in the bank to pay it at any given moment so that you're not borrowing from your future self. If she 'underspends' by a little bit each month going forward she should be able to get that in hand over time.

Overall she sounds like a person (as many of us are or have been) who will use all the credit she has available to her. Sounds like she needs to sit down and work out how she can get back in the black. Of course, you can't do that for her if her finances are separate and she's not interested. All you can do it nudge her in the right direction and be there for emotional support.

FinallyGettingFree

midnitegremlin wrote: »

I think what the OP was saying is that she does her spending on the CC and then pays it off in full. That's actually the best way to use them, I feel, assuming one has a steady income to cover the bill. But for sure, a budget is always good too!!

It's not really a sensible way to use a credit card - she is living a month behind her salary, as her salary is paying the previous month's credit card bill. She then has to go straight back into credit card debt to live for the next month.

gettingtheresometime

Although it seems an insurmountable hurdle now it, she/you can sort this out.

What I would suggest is that she gets herself a basic account where she won't be able to have an od ( as I've said elsewhere if she hasn't got it she can't use it).

I cleared £1k worth of od debt by doing this and then paying into the account with the charges the amount of the monthly fees plus a little extra so I was always chipping away at the debt...and getting the bank to reduce the od limit so I couldn't be tempted to reuse the od.

By use the cc to live on is ok if everything is hunky dory but what if she's ill and her sick pay is just ssp? That's when the proverbial starts hitting the fan.

midnitegremlin

FinallyGettingFree wrote: »

It's not really a sensible way to use a credit card - she is living a month behind her salary, as her salary is paying the previous month's credit card bill. She then has to go straight back into credit card debt to live for the next month.

If she's paying it off in full, it's not going to incur interest, so it's not so bad.
Short term, interest free credit.

ViolaLass

midnitegremlin wrote: »

If she's paying it off in full, it's not going to incur interest, so it's not so bad.
Short term, interest free credit.

One emergency away from being in trouble.

midnitegremlin

ViolaLass wrote: »

One emergency away from being in trouble.

For sure, but that rather sums up the whole "being in debt" thing in general.

I think often people will run up an overdraft and then their pay will go in and "clear" it- again not ideal, but roughly the same thing. Actually, I'm no inspired to post another thread.