Overdraft

[Conzar]

Hi guys as I'm only young and I want to get another bike, I asked my bank if i could get a £1000 loan they said they would look at it, a couple of months passed and they have got back me saying they can sort out a £1000 overdraft, now I'm sort of confused to how this would work?

yes a silly question but any help would be grateful thanks.
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Current ride: ZX6R 636 ------- Previous:KTM EXC 450 Supermoto --- ZX6R B1H --Hornet 600--CBR 600--SV650
11:05:35 Rob Fzs: i just wanna own an rd350 valve before they send us to war with durkadurkastan

[The Artist]

It is just another way of borrowing money. It is fairly easy.

If you say yes, you just need to withdraw the money from your bank account and your account will go into negative balance. So long as you know the fees for your overdraft, it is that easy.

The basis for an overdraft is to pay it back in full at the end of each month to minimise any charges but a lot of people do not use it that way.

I have no idea how it affects your credit score. Probably best to go in and speak to someone at the bank about it and get everything explained.

Most people have an overdraft available, it is probably the most common form of bank lending.

[The Shaggy D.A.]

https://www.bba.org.uk/customer/article/understanding-a-personal-overdraft

Surprised it took them months to get back to you, for something like a grand I'd expect a 5 minute decision.
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[-Matt-]

Definately go down the bank and talk to them and get terms on paper to see clearly what will be due when and at what cost. If you misjudge repayments in someway it can start adding up very quickly with an overdraft. And you dont want to get a bad credit score as it comes back to bite you years later for mortgages etc

[Pete.]

Basically, they add £1000 to your account by moving the account lower limit down to -1000. You get charged interest for using this facility (i.e. going below zero) but not fined heavily as if you went over-drawn without authorisation.

It's a clever move by them. They are basically counting on you using the overdraft facility perpetually, so they get a constant income from the fee, rather than loaning you the money for a fixed amount of interest. Likely the interest charges are higher than a loan because of the added flexibility for you.

With a £1000 overdraft your mini-statements will say something like this if you had £200 in the bank.

Account balance - £200
Available to spend - £1200

They often charge a fee just for having the facility even if you never use it, so check the small print for that and check the rates of interest for going into overdraft before you commit.
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a.k.a 'Geri'

132.9mph off and walked away. Gear is good, gear is good, gear is very very good

[angryjonny]

Overdrafts are a very expensive way of borrowing money and should only be used in cases of emergency. If you dip in and out and clear it at pay day you may not get too badly shafted as long as your overdraft is authorised (yours clearly is) but as a way of borrowing money over the course of months or years, check the "overdraft interest and fees" deta for your account because you can easily spiral into an inescapable debt hole via this method.

IMO: a standard overdraft is better than the payday loans those sinister puppets advertise on the telly but worse than more or less every other form of borrowing.

[chris-red]

I just got a Fluid card, they were offering 16 months interest free on payments.

However now tesco are offering 18 months!

https://www.moneysupermarket.com/credit-cards/search/results/?msmsearch=false&goal=CC_PURCHASE

I just got my first car, insurance was £850 lump sum or about £1200 monthly. I got the card, put the insurance on it also put a new stereo on it now just pay 1/12 of the total monthly by direct debit.

Once it's paid off I'll cancel the card and probably get another to pay for next years insurance.

With that tesco one you could buy a bike and put 1/18 of it off monthly/ Work out how much you could afford to pay a month times it by 18 and theres your budget. Downside is you will have to use a dealer.
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[Pie-Roe]

[Benson_JV]

[Lord Percy]

If you can pay off the overdraft quickly, it's far better than a loan.

Just don't stay in the red for too long.

Also an overdraft is better because there is no expected payment each month, whereas a loan is more strict. However if you have the overdraft too long, the interest begins to outweigh that of a loan.

Before the financial meltdown malarkey, I had an overdraft of a grand and wasn't charged a penny for it. -1000 was my '0' for months. Ah, them there golden days. How I miss it all, so long ago.. How I miss 2007. . Nah in fairness I was daft, although I did have the means to afford it, and eventually told the bank to stop it and put a note on my file saying I didn't want another one.

Anyway... In short: Overdraft for short term. Loan for long term. It depends how quickly you can pay it off. If you're looking at an overdraft because it looks like free money... don't bother because things are different now!

[Marmalade]

[yaigi]

Heh, I live in my overdraft. My account never sees a number above zero My charges are absolutely minimal though due to having a good old graduate account. That's prob gunna change V soon though. Awww heck.
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[treeno]

Meanwhile I have a 1.4k interest free overdraft.

But seriously, you say you're only young, how are you going to pay off the overdraft amount plus interest? I would advise against it unless you have a source of income, but then why not just save up?

[Conzar]

I do have a income, but with car insurance and petrol I find it hard to save up
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Current ride: ZX6R 636 ------- Previous:KTM EXC 450 Supermoto --- ZX6R B1H --Hornet 600--CBR 600--SV650
11:05:35 Rob Fzs: i just wanna own an rd350 valve before they send us to war with durkadurkastan

[J4mes]

If it's hard to save up then it'll be hard to pay back, surely?

Or are you selling the car to pay the OD back?

[The Artist]

Don't borrow what you can't pay back. I borrowed when I was 18 working part time and screwed myself up. I only fully paid everything off after a year of working full time.

Miserable existence earning to pay back.

Only time I will borrow now is specific large purchases on a credit card I can pay off each month because I want the protection.

Apart from that, I don't borrow because although it is useful, the negative far outweighs the positive.

Only borrow if you NEED to. If you can get away with saving for a while then do that instead.

[supZ]

cheapest way i've ever done it was at the time virgin were doing 0% on balance transfers for 14 months.

got it, transferred £3k into my bank account, used it as needed then just saved up and paid it all back the month before my 14 months were up. no interest, no fuss and interest paid to me for putting the cash in my savings account.

that said, the above is very true.. if you can't save how will you pay it back?
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[Pete.]

[Conzar]

Car insurance is £200 a month that's why, if I get rid then I can save.
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Current ride: ZX6R 636 ------- Previous:KTM EXC 450 Supermoto --- ZX6R B1H --Hornet 600--CBR 600--SV650
11:05:35 Rob Fzs: i just wanna own an rd350 valve before they send us to war with durkadurkastan

[The Disapproving Brit]

[prizefighter]

Santander recently changed the overdraft fees on my current account to charge me £1 for every day I'm overdrawn.

That would be a hefty APR compared to a loan if you were overdrawn by that much for a year...

[Ste]