Overdrafts

Liz65

Hi, can anyone advise me as to what is the best way to get rid of our overdraft please? 
At present we only have my husbands income as i am looking for work.
We have an overdraft that we use every month to the last penny and it is costing roughly between £11 and £15 per month.
We have tried to budget for £100 less to get rid of it but it hasn't worked so far.
I have looked into a cash transfer credit card with 0% interest for a period that we could pay back and start afresh.   I am also looking into changing banks and transferring the direct debits over one at a time and leaving the overdraft in the current bank account and then paying it off monthly.
If i were to do this would the bank be able to demand immediate payment of the whole amount?
Please does anyone know what other way I can deal with this, we do not want to get a personal loan if possible.  Thank you

Brie

I've asked this to be moved - "needs to be on the debt free board or something in banking." - so you get more appropriate responses.

Brie

That said - the debt free board will want to see a statement of accounts (SOA) and there's a link on one of the top posts.  Others may be able to spot more ways for you to attack the overdraft.

If you change bank and move your DDs you can leave the overdraft behind and that's the way lots of people separate their debt so they can deal with it in isolation.  Just don't use a switch service as that will link the accounts (so I'm told).  

If you have an overdraft that will be showing on your credit history and might reduce your options for credit card applications.  Whomever you apply to will want to know that there is sufficient ££ available to cover both the overdraft and the card's limit.  It won't matter if you say you are going to do a money transfer to clear the overdraft because there's no guarantee that you will actually do that.  You might use the card to book a jolly to Ibiza instead.  

Anyways - best of luck with it - I hope you are successful as I know myself how debt can be very stressful.

MSE_ForumTeam5

Moved as suggested

CliveOfIndia

Liz65 said:

If i were to do this would the bank be able to demand immediate payment of the whole amount?

One of the "dangers" with an overdraft is that a bank can withdraw the facility and demand immediate and full repayment at any time (not just if you decide to switch).  I suspect this actually happens very rarely in reality, but they do have the right to do this.  So you're right to want to tackle it, especially since overdrafts tend to be an expensive form of borrowing.

Also, as noted by Brie, regular use of an overdraft can tend to make potential lenders a bit jittery, so you may find your options somewhat limited.

Liz65 said:

I have looked into a cash transfer credit card with 0% interest for a period that we could pay back and start afresh.

This is certainly one option to explore - if you're able to get accepted for a Money-Transfer card.  Two things to bear in mind though.  Firstly, there's usually a fee for doing the transfer, so you'll need to factor that into your calculations.  Secondly, you absolutely must budget to be able to repay the card in full by the time the promotional rate expires.  Otherwise any remaining balance will start to accrue interest at the card's standard APR, which will be pretty high.  Yes, you may be able to do a balance-transfer of any remaining balance, but it would be foolhardy to just assume you'll be able to do that.

Liz65 said:

We have tried to budget for £100 less to get rid of it but it hasn't worked so far.

This is probably the most sensible option overall.  Start out by completing an SOA ( https://www.lemonfool.co.uk/financecalculators/soa.php ).  Select the "Format for MSE" option, copy and paste the results here and you'll get plenty of objective advice on how to proceed.

Martico

Another option to explore, if you're 100% sure that you'll be able and willing to clear it before the deal runs out, is a 0% spending card. I got one a couple of years ago from M&S. Used it for my day-to-day spending in the first month, which allowed breathing space in my current account, and had 24 months to chip away at that balance, keeping up with minimums all the way. If your overdraft isn't too excessive and you have the discipline to pay the card off before teh 0% deal runs out, that could be an option. 

fatbelly

Have a read of this

https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

Liz65

Thank you for advice

sourcrates

Your plan is a good one, it makes no difference if the bank demands immediate payment, they can demand what they like, all that will happen is the debt will go to collections, and you pay it off as you had intended.

If you tell them you are struggling to get out of this situation, they may freeze or stop interest for you.