£5,000 Overdraft with no light at the end of the tunnel!

DellaEssie

Hi all!

I'm in need of some advice! 5 years at Uni and some really poor financial management have left me now aged 26 with a £5,000 overdraft that I have been living in for years. I need this year to be the year that I make real headway in clearing it. I have no other cards, accounts or debts, although I imagine occasionally going over my overdraft limit has left me with an appalling credit score.It doesn't help that I suffer with bad anxiety, so my 'closed eyes' approach is part of the vicious circle. What is the best way for me to tackle this? Has anyone tackled this amount sucsessfully before? I have spoken to StepChange previously and they have advised I set up a budget account, which I was a bit hesitant of doing.

Any advice gratefully recieved!

arc2014

If you could post your SOA we might be able to give you some advice. There's a link in the sticky thread. Although opening another account away from where your debt is, is a good starting point.

vadc01

Hi DellaEssie

Have you asked your bank if they will automatically reduce the overdraft when you get paid? I did this with the Halifax - we agreed a set amount and it was reduced each month. It stopped me putting the money to one side to save up, so I wasn't tempted to spend it. I did this with the Halifax. Just be careful you don't set up too big a reduction and choose a manageable amount. Hope this helps.

ThisIsMe

I have a large overdraft with Lloyds and they reduce the overdraft limit by £10 each month. This is good for me as i don't really miss £10, plus it means it's going down, even if it is just by £120 a year. Anything is better than nothing!

EssexHebridean

Firstly if you currently have an agreed limit and you keep going over that don't reduce it at the moment - the key is first to build yourself a cushion within that OD limit and THEN look at reducing .

As someone else said an SOA (Statement of Affairs) is key here as it sounds as though you are currently spending more than you have coming in - and that never results in a happy state of affairs. You'll find the SOA link in my signature - fill it in accurately and honestly - it needs to reflect the way things are right now, not what you think you should be spending, or what you think people expect to see, that's not helpful. Go back over bank statements (and cards if you use them) and don't forget to account for cash withdrawals for general spending too - this can sometimes get missed. Post it in here and we can take a look - and once it's tweaked into shape you'll have a proper budget to work to - possibly for the first time in your adult life?

Once you've lived with the budget for three months you should have started to build a cushion within the agreed overdraft limit and can then look to reduce it down to that level, and then continue reviewing every few months.

Good luck! You're right to tackle it too - overdrafts are what I refer to as "dangerous debt" as they can of course be recalled at any time by the lender - scary eh?!