How to stop living in your overdraft


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An overdraft on your current account can be a helpful way to pay for emergencies, however if each time funds go into your account all it does it top up the overdraft you could be paying a lot in fees and interest.
There is lots of help out there with advice on how to stop living in your overdraft. We have collected the top tips, and a few of our own.

Look at your budget!

Create a budget for your monthly outgoings, look at direct debits, standing orders, could you make a saving on your bills? Also look at non-essential spending, can you cut back on take always or lunch out? Check out our budget help blog, with top tips on how to create a budget and reduce your monthly spend.

Work out how much you can repay.

Now you know have a realistic budget, how much can you afford to repay on your overdraft? For example, if your overdraft is £1,000 and you can repay £50 per month, you want your closing balance to be -£950. Keeping track of reducing the overdraft is key, and when your overdraft is for example £-750, see if your bank will reduce it. That way you will not undo any of your hard work. It can be difficult to stick to this method, but you will quickly see a reduction in your overdraft by reducing your monthly spend each month.

Change banks?

If you are struggling to reduce your overdraft by spending less each month changing your current account to a new bank account (without an overdraft) could be a solution. From the new bank account set up a standing order for an affordable repayment towards your overdraft and start reducing it.

Don’t want to change your bank?

You may be happy with the service of your current bank and do not want to change your incoming payments. A personal loan or 0% balance transfer credit card could be a solution. Compare the costs of your overdraft fees and how much you would pay in interest on a personal loan, you could save money. Our loan calculator slider will give you an idea of how much a personal loan with ESLCU would cost compared to overdraft charges.

Personal loan or balance transfer

If you can get a 0% interest credit card, a balance transfer of your overdraft could be a great way to reduce your interest charges. You need to make sure you close the overdraft once it is paid off and do not use the 0% card. Check to make sure the repayments will clear the credit card before the 0% runs out! If you are unable to get a 0% balance transfer credit card and are struggling to reduce your monthly spend, you will need to compare the costs of a credit card, personal loan or the interest fees before taking any further credit out. You want to yourself money in interest and fees, not increase them!

Stick to it

Once you have found a solution that works for you to repay your overdraft, do not be tempted to stray back into it. You can do this by closing the overdraft on your account or by using a pre-paid card for all your day to day expenses. Our Change Account comes with a debit card, and mobile app, and no overdraft!