An overdraft, and the charges it attracts, can cripple you financially. We took a look at how to clear your overdraft, and reduce your financial strain.
Banks Can Cancel Overdrafts
Your bank may cancel your overdraft at any time, according to the terms and conditions of your bank account. I can envision getting paid and the bank deciding to close the entire overdraft before any payments were paid.
Thankfully, it never occurred, and I rarely hear of it because the bank is aware of the financial hardship they will cause.
However, you should protest if your bank cancels your overdraft without giving you any prior notice and you later incur fees for failing to pay your invoices or direct debits.
You should first direct your complaints to the bank, and if you’re not satisfied with their response, you can take your case to the Financial Ombudsman Service.
Clear It yourself – Budgeting
You must first figure out how you can pay to live and survive.
In order to determine how much money you have left over each month, look at your income and expenses. As part of a sinking fund, consider including expenses for new glasses, MOT and car servicing, and birthdays.
But is there anything you might remove from your budget?
However, it won’t last always. If you reduce your monthly expenses, your debt will disappear much more quickly.
Nothing prevents you from starting to spend on extra indulgences once your overdraft has been paid off. Making a few short-term sacrifices will only assist to hasten the process of having your overdraft cleared.
Clear Your Overdraft – Manage Spending
Spending on a daily basis can also have an effect.
Keep a spending log to track where your money is actually going.
Even though you may believe that you have your finances under control, impulsive cash spending can rapidly undo all of your meticulous preparation.
Additionally, whatever funds you make must be used to pay down your overdraft rather than getting sucked into impulsive expenditures if you want that to decrease.
You might be able to rein in your spending and increase your savings if you truly understand where your money is going and are aware of it.
Gradually Reduce Expenditure
Little and frequently is the key.
When you get paid, reduce the debt as soon as possible because your budget will show you how much you can pay off the overdraft loan.
As a result, you won’t be tempted to spend the money.
Whatever the case may be, if you find yourself with extra cash, put it in your bank instead of spending it. Reduce your overdraft limit as well.
Holding onto money for a “just in case” or “rainy day” will only result in it being spent on necessities and disappearing forever.
What’s even better is that you can immediately see that you’re winning and that the overdraft amount is declining when you check your statements each month.
Clear Your Overdraft – Savings
It can be worthwhile to use your money to pay off your overdraft debt if you have any.
Your savings’ interest rate is probably lower than the monthly payments for your debt and other expenses.
Why not attempt some easy ways to save money without trying and then put it towards it if you don’t have any savings?
Using an app like Chip allows you to get regular payments from your bank without feeling shortchanged. To determine how much you won’t miss, it employs algorithms.
While you’re in your overdraft, you can still utilise the app and set goals for yourself.
Consider using an app like this one to reduce your overdraft.
It’s Good To Talk
bringing up the subject of debt gets things done and advances in the appropriate way. And the amount of weight lifted will amaze you!
First off, if you’re having trouble, please contact your bank.
Increasing your overdraft won’t always help because you’ll just end up getting into more debt. Ask instead if they can reduce the interest rate or freeze the fees.
They may reject you, which demotivates you from trying in the first place and causes you to slump.
Switch Accounts?
You can make sure you’re getting the greatest deal from your bank in the same way that you compare pricing for auto or house insurance and switch your energy provider.
To get lower rates and fees on an overdraft, compare various bank accounts.
Due to the Current Account Switching Guarantee, you won’t have any trouble opening a new bank account. However, the new bank might not offer you the same level of overdraft, depending on how bad your credit is. But until you check, you won’t know.
They might be able to work out a plan for you to settle your overdraft. Before switching, you will need to figure out how to repay the overdraft if you’re not moving it.
