Making mone from my Student overdraft

jollyme

Hi,
I've been looking at ways to make money from my student overdraft. I was wondering if anyone has withdrawn the full student overdraft and immediately invested it in an ISA account. The plan would be to trickle feed the money back into the student account using online banking. By the way I know that I can't invest more than £3000 into an ISA in any tax year - also I have no other ISA accounts. I was thinking of using a Natwest Student account and a Natwest ISA so that the transfers would be immediate. It all looks possible but was wondering if anyone has done it.

melancholly

people do manage to make money like that - i would certainly pick the ISA with the best possible interest rate, which won't be Natwest - you will get more over the year that way and it just requires leaving 4 days for transfers. if you don't have an existing one NS&I may be a good option but i'm not sure what is best right now - martin's article should help:
http://www.moneysavingexpert.com/savings/best-cash-isa

kingmonkey

I did it at university but didnt bother with ISA since I didnt qualify for income tax anyway.

The gains arent that much; I used to measure it in nights out ie 2-3 nights out gained in an year.

reehsetin

ive put both student loan and overdraft into savings, isa first and then drip feeding from an e-saver into things like the lloyds 8% regular saver

jollyme

Thanks for you thoughts ppl. The important thing as far as I can see it is that if I use Natwest to Natwest I wouldn't have to wait four days for clearance the money would be there instantly - or have I got that wrong??The difference of a few fractions of a percent in interest that I might gain from investing elsewhere would surely be outweighed by not losing 4days interest everytime I transfer to my student account and the fact I could still spend when I want to without having to wait 4days. What do you think ?? Would Natwest tell me that I cant use my overdraft like that- I mean it would be obvious what I was doing??

bwgames

The question is, can you survive without the student loan and overdraft, what are you planning on living on?

I did consider this, but wasn't sure what the point was... The amount you'd get (assuming £4k loan and £1.2k overdraft, thats £5.2k, assume a 6% APR rate, 6% of that is £300... Not something to be sniffed at, but having all your money tied up in a separate account......

jollyme

I definitely need my overdraft and loan to live on!!! That's why I would need to trickle the money back to the student account from the ISA. The ISA would need to have instant access and I would have nothing in there at the end of the year - not what ISA's are intended to be used for I know - but why not?! Just a sneeky way of getting interest on my student account - kind of.

SamW

I have a NatWest Student Account and an E-Saver account too. The interest isn't too bad, but I do as you say. Essentially live within the last £200 of my overdraft, whilst my other money earns me lots of interest and then I feed it back in as and when necessary. As the funds transfer immediately it's pretty good :-) x

clairol55

I was considering doing something similar. I am hoping to get the high overdraft Halifax account. I am planning to use £1250 of this as a normal overdraft and put the rest into a nationwide (my normal bank) 1 year fixed rate ebond along with other savings for next year (a total of about £5000). This ebond pays interest each month into my nationwide current account so I would be gaining money I could actually use this year in total about £500 i think (the interest rate is 6.5%).
Does this sound feasable? If I don't get the Halifax account would it be possible to open two student accounts anywhere?

rainbowtrout

You can definitely do this--no bank will stop you from doing so even if they know what you are doing. It's your right to do what you like with your money.
However the interest is not as good as bwgames suggests, the reason being you get paid your student loan in three installments instead of one lump sum at the start of the year, so the interest on a 3k loan in a year (at 6%APR)is:

(1000*0.6)+(1000*0.6/12*8)+(1000*0.6/12*4)=120GBP.
for a 4k loan this will be 150GBP.

Not bad, but not the optimistic figures suggested before.

Also universities will usually ask for a variable sum deposit on rent at the start of the year (mine is a whopping 600GBP, so my student loan essentially goes out the minute it hits my account). Make sure you take this into account becuase your whole year's interest can go out in three unauthorised overdraft fees.

As for your days to clear funds question, it's best to ask the bank. I have an instant online saver and a student account with HSBC, and when I transfer money between them the money appears in the other account instantly. However the money is not AVAILABLE for withdrawal until 48hrs later (even though it already appears as balance in the other account). I have had cheques declined because of this confusion. Call up the bank instead of trying to second guess their policies because they often make no sense whatsoever.

rainbowtrout

Also sorry to be even more pessimistic about this but I need to revise those calculations:

You get 120GBP from a 3k loan a year @ 6%
150GBP from a 4k loan

The student loan company currently charges you interest at 4.8% a year (linked to inflation)

4.8% on a 3k loan (calculated from the day payment is issued to you) is 96GBP

NET GAIN from saving your student loan is a measly 24pounds a year

On a 4k loan interest charged by the SLC is 120GBP
NET GAIN 30GBP a year

You would not SEE the interest on your student loan until you graduate and start repayment, or until you see you annual statement. Therefore it's very easy to get an inflated sense of how much your money is earning in a bank account.

So completely agree with poster above who reckons you can get enough money for a couple of nights out from going through all of this.

However I still think the savings account strategy is better than leaving it to rot in a current account because at least the interest earned is offsetting the interest you will be charged from taking the loan out in the first place. Just don't expect to get rich on it, or blow all the interest at once because you think it's 'your own money'!