Overdraft debt can leave you feeling stressed and worried. If you have been living in your overdraft and paying off debt for what feels like forever, you might be at your wits end. However, there are some steps you can take towards paying off your overdraft and becoming debt free.
Keep reading to explore five strategies for clearing overdraft debt and frequently asked questions about the topic. Scroll down to get started.
Overdrafts allow you to borrow money through your bank account without any separate loans or credit lines. Essentially, you can spend more than you have in your account by becoming “overdrawn”.
You may have an interest free overdraft limit or an interest charging overdraft limit — both will be agreed with your bank before you can use them. Going over your overdraft limit, may result in you being charged a higher interest rate or daily charges.
Overdraft debt is when you cannot completely pay your overdrawn funds back. This leaves you within the overdrawn section of your bank account, and depending on your overdraft agreement, you might be charged hefty fees or interest.
Banks don’t forgive overdraft debt. However, they sometimes waive overdraft fees. This depends on your amount of fees, contract and the T&Cs of your specific bank. To find out more, speak directly with your bank or building society for financial help.
Overdrafts are designed for short-term borrowing and not habitual use. If you are using your overdraft every month or cannot seem to get out of it, you should reflect on your spending habits and budget.
Unsure where to start? Budgeting is the best way to curb spending and start paying off debt.
There are multiple ways to tackle overdraft debt. Here are three potential strategies to consider.
If you have decided it is time to tackle overdraft debt, the first step you should take is reviewing your expenses. Look at how much and where your money goes every month. Are there any unnecessary expenses? Are you living above your means? Work out how much you can afford to spend without borrowing and use this as a guideline.
It can also be helpful to speak with your creditor or bank. Sometimes, banks agree to gradually reduce your overdraft limit every month or suspend charges and interest fees for a while.
Finally, you can also choose to work with a financial adviser. These professionals will examine your financial situation and help you create a roadmap to healthier finances. However, you will have to pay for advice from independent financial advisors.
If you want free debt advice, StepChange is a debt charity that provides expert advice without fees. Their services include personal action plans, confidential advice and helpful calculators and tools.
Overdraft debt can be a stressful experience. However, there are ways to repair your personal finances. When you need to borrow money, always weigh up the pros and cons and only borrow as much as you can afford to pay back. Late or missed repayments can result in financial problems and high fees.
For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.