Overdraft - options please

Ivrytwr3

Hi all, 

I'm currently overdrawn with HSBC. £3k overdraft with £1900 overdrawn.

I keep putting it off doing something about it as I'm due a lump sum in 3yrs, which I would use to clear it. 

Do I keep being overdrawn or is there a better way to handle this and save on charges? 

(aside from pay it off now, which I can't do)

elsien

You had 8K back in August. Presuming that the three years is the maturity date for the savings account?
So did you have the overdraft when you had the savings or have you run it up since? Genuine question because knowing how the debt arose and over what timescale is necessary to work out how to deal with it.

enthusiasticsaver

Can you gradually reduce it and the limit at the same time? So £1900 this month, £1800 next month and so on? Overdrafts are one of the most expensive ways to borrow money and can be cancelled at any time so it makes sense to reduce your reliance on it. 

Ivrytwr3

elsien said:

You had 8K back in August. Presuming that the three years is the maturity date for the savings account?
So did you have the overdraft when you had the savings or have you run it up since? Genuine question because knowing how the debt arose and over what timescale is necessary to work out how to deal with it.

The £8k was a from a CTF - that has gone into a 2 year savings account for him while he studies at Uni.

The overdraft has got to this point over a number of years, it was £900 at the start of the year, however an overseas holiday saw it go up to £1400 (which i didn't want!) and now with Xmas, £1900!

It was going down, but some unexpected bills this year, also Uni costs and increased prices etc has seen things spiral.

EssexHebridean

Ok - you need to stop living beyond your means is the first thing. When you are already in debt, adding further to that debt by using credit to fund holidays and known expenses (like Christmas, for example!) is not a sensible thing to do.

Do you have any other debt as well? And might you be eligible for a 0% money-transfer card? (Use the main MSE site to read about these, and the free MSE Credit Club to establish eligibility) - that might allow you to gradually clear the overdraft faster as you will not be being hit with the hefty fees that mean that overdraft is one of the most expensive mainstream ways of borrowing - however, this method must be used alongside a proper budgeting system and saving for the things you want/want to do! 

Sounds like your best starting point is to complete your SOA (statement of affairs) and begin to work out a proper budget which includes putting money aside monthly for things like presents (Christmas, birthdays) and holidays. Look at it this way - if you are planning an £800 holiday for next July, you need to save £100 a month from now until July to afford it. If you expect to spend £600 on Christmas 2023, then you need to save £50 a month from now to afford that. 

Once you have a proper, grown up, functioning budget, and have managed to clear the overdraft onto a 0% card if that is an option for you, then reduce the available overdraft down to a level which means it is there for an emergency (for example, forgetting to shift money from elsewhere to cover an upcoming payment) - if you have to clear the OD in situ then look to “chase” the amount available downwards - so when the OD owing reduces to £1500 you might downshift to £1800 available, when it hits £1000 owing perhaps adjust the available amount to £300. Having the limit you have currently is frankly ludicrous - £3000 is NOT an amount you want to be owing on such a precarious method of credit (and indeed ideally, not at all!) 

Sncjw

Could you post your soa. It seems your living beyond your means. 

We can take a look to see where you have save to pay the overdraft and then once that's paid to create a surplus 

sunshine_raincloud

I agree a money transfer 0% CC might be an option (this is how I have paid off my overdraft) but you need to make sure to reduce your overdraft limit and not be tempted to go back into it, or spend any more money on the CC if they give you a bigger available balance! Going through 3 months (or more!) of bank statements should show you where your money is going and where you can cut back to start dealing with the debt. Good luck!

enthusiasticsaver

Ivrytwr3 said:

elsien said:

You had 8K back in August. Presuming that the three years is the maturity date for the savings account?
So did you have the overdraft when you had the savings or have you run it up since? Genuine question because knowing how the debt arose and over what timescale is necessary to work out how to deal with it.

The £8k was a from a CTF - that has gone into a 2 year savings account for him while he studies at Uni.

The overdraft has got to this point over a number of years, it was £900 at the start of the year, however an overseas holiday saw it go up to £1400 (which i didn't want!) and now with Xmas, £1900!

It was going down, but some unexpected bills this year, also Uni costs and increased prices etc has seen things spiral.

This looks like a slippery slope you are going down.  Holidays and Christmas need to be saved for rather than put on an overdraft which is an expensive way of borrowing.  If you can get a 0% money transfer card you might be able to put  it on there or as I said earlier gradually reduce each month until you are in a  position to get rid of it.  Going forward budgeting and saving stops you going overdrawn and maybe lose the mentality that an overdraft is free money to be spent.