Payment plan to clear overdraft - does it affect credit file?

Harry_247

Hi all,

I got myself into a sticky situation with an overdraft at HBOS, and my overdraft is now sitting at £5,000. However, I recently started a well paying job, that means I have a decent amount of money left over after bills/other expenditures, but the one thing that is killing my account is the overdraft fees (around £200 a month), which limits how much I can save.

I just phoned my bank to see if there was any options to waive fees/help my situation, and they told me about a payment plan where they would clear my overdraft and I would pay a fee of around £400 a month, and after 12 months it would all be cleared.

My question is - is this worth it? My credit rating is poor as it is, but is slowly getting better, and I don't want to do anything that would potentially affect it negatively, but at the same time the £200 p/m I'm paying for fees equate to £2,400 a year which seems extortionate especially if at the end of the year I don't have much to show for it.

How negatively does a payment plan to my bank to pay off my overdraft affect my rating/how long does it stay on my record?
Is there any other options that anyone knows about that I could look at if this is such a bad option?

Many thanks for all your help!

sourcrates

It`s at the discretion of the bank, but usually it would be marked as AP "arrangement to pay".
This can stay visable on your file for 6 years after you have finnished repaying the debt, so twice as long as a default would be there for.

If that`s the only black mark on your file, then its not going to make a whole world of difference to you.

How people usually tackle overdraught debts is by opening a new account and transfering all your banking to that account, then just transfer over a set amount every month to repay the OD plus charges.

Asking a bank to stop OD charges will nearly always result in negative information being recorded on your credit file, as you will have broken the terms of your contract with them, it depends if you value a clean credit file over getting out of debt.

Socajam

How much more are you earning in this job from the one you left?
Use the increase in your new job to tackle the overdraft like the devil is on your back.
Yes, savings is important, but in this instance I would skip the savings for say, x number of months and put all that money along with cutting your expenses on the overdraft.
If it meas taking lunch to work for the next 3 months do it, cutting your going out money to 1/3 do it.
Obviously you have been living well beyond your means guess what it has finally caught up with you.

Harry_247

sourcrates wrote: »

It`s at the discretion of the bank, but usually it would be marked as AP "arrangement to pay".
This can stay visable on your file for 6 years after you have finnished repaying the debt, so twice as long as a default would be there for.

If that`s the only black mark on your file, then its not going to make a whole world of difference to you.

How people usually tackle overdraught debts is by opening a new account and transfering all your banking to that account, then just transfer over a set amount every month to repay the OD plus charges.

Asking a bank to stop OD charges will nearly always result in negative information being recorded on your credit file, as you will have broken the terms of your contract with them, it depends if you value a clean credit file over getting out of debt.

Thanks, yea that's what I feared - the employee I spoke to on the phone said she wasn't sure how it would affect my rating - not much she thinks, but it sounds a whole lot like a DMP to me, which I thought stayed on your file for a good while.

And thanks for that bit of knowledge about waiving fees negatively affecting it too - didn't realise that.

I would be able to save around £250 p/m assuming I don't go ahead with the payment plan she offered me, which would bring the o/d down to around £2,000, but it just seems frustrating to burn through an extra £2,400 in fees in 12 months time, but I guess it's only myself to blame!

You mentioned opening an account - do you mean a new account at a new bank with lower o/d fees?

Willing2Learn

sourcrates wrote: »

How people usually tackle overdraught debts is by opening a new account and transfering all your banking to that account, then just transfer over a set amount every month to repay the OD plus charges.

The problem with this, is that it increases the likelihood of your original bank withdrawing the overdraft facility and demanding the repayment of borrowed funds...

If it were me, I would use the fact that you have "recently started a well paying job, that means you have a decent amount of money left over after bills/other expenditures" to gradually repay the overdraft. I would only open a new account as a last resort.

Yellow_mango

Would it be possible to money transfer onto a 0% credit card to pay down without fees? (With the usual proviso / assumption of course that you actually pay down within the interest free period and don’t just add to the debt)