Many people have overdrafts for a variety of reasons. This could be because they are spending more than they are paid each month or that they had a large expense that they paid for from their current account and have not been able to pay back the money. It can be tricky to repay an overdraft and so below are some tips to help.
See if you have any savings
Firstly it is a wise idea to see whether you have any savings that you can use to pay off your overdraft. You may have forgotten about some savings that you have so think about money that you put away in the past and bank accounts that you used to have as well as more recent ones. You may not like the idea of using savings as you may have a purpose for that money. However, you should think about how much money you will save in overdraft fees if you do manage to pay some or all of it off. An overdraft can be one of the most expensive ways to borrow money and so you need to make sure that you get it paid off as quickly as possible. Any interest you are getting on the savings will be tiny compared with what you are paying on the overdraft fees. Once the overdraft is repaid, you can concentrate on building up savings again.
See if a loan is cheaper
It can be worth looking around to see whether it might be cheaper for you to get a loan. Even if you have bad credit. This can be a much cheaper way to borrow money in most cases. Take a look at the interest rate and other costs and compare it to what you are paying on your overdraft to work out whether you will be better off. If you do decide to use a loan to pay off the overdraft, be careful and make sure that you are not tempted to get overdrawn again, then you will have loan repayments and an overdraft to pay back. If you think you are likely to do this, then it is probably wiser to stick with the overdraft as it could be cheaper in the long term and easier to manage compared with a loan and an overdraft.
Speak to bank about rates
It might be worth talking to your bank about their overdraft rates. Try to get an appointment to speak to a manager and explain that you are struggling and whether they can do anything to help to keep the costs down. It may be possible that they will be able to help you. They may be able to suggest a different loan that they could offer you to help out but make sure you consider the point above and only take it if you know that you will not go overdrawn again.
Concentrate on spending less
It is well worth thinking hard about what you are spending money on and trying to spend less. It is easy to think that we only buy necessities when we may in fact be buying a lot more than we actually need. It can be hard though, giving up certain things. If you question everything that you buy and think about whether you really need it now, whether you can go without it until the overdraft is paid off or if you can go without it entirely. Also compare the prices of everything that you buy to make sure that you are not paying more than necessary. This not only applies to groceries or clothing when you are in a shop but also your utilities, phone contract, broadband, insurance and things like this. You may find that you can get the same service but for less money.
Of course earning more money will allow you to have extra to pay towards your overdraft. It can be difficult to do this, especially if you have to be at home a lot or do not have the opportunity to work extra hours or change your job to a better paid one. However, there are now genuine opportunities to earn money online and this could help you to get some extra money. Even if you are just getting small amounts for little jobs, it is better than none. If you can spend the time when you would normally be watching television or playing video games, earning a bit of extra money it could help you to get that overdraft paid off more quickly.
Learn to Budget
If you are finding that you are going overdrawn every month because you are spending more than you are paid then you need to budget your money better. You need to be aware of how much you earn and how much you spend and then you will be able to work out how much your overspend or have left each month. Look at the costs of the necessities and see whether these are low enough for you to afford and therefore whether just reducing spending on luxuries will be enough. If it is not, then you will need to look at downsizing so your rent and insurance and other living expenses are cheaper or finding ways to earn more money.