If you’ve ever borrowed money from your bank, this is known as an overdraft. Obtaining an overdraft from the bank is like a loan that you must pay back over time with interest. Most people get an overdraft from the bank because they have used more money than is available in their bank account.
It is crucial to manage your overdraft as this will increase the interest rate percentage over the years or months if you do not pay the loan in time. Unfortunately, many people go into debt because they cannot manage their finances well, which leads to them not being able to pay back the overdraft.
Can you lower overdraft?
This article will inform you how you can lower your overdraft by implementing simple measures. Firstly, yes, it is possible to lower your overdraft; therefore, these are the most critical ways in which you can do precisely that:
- Note down how much you owe- This should be the first step to lowering your overdraft. Knowing how much you need to owe will benefit you in several ways; this will help you manage your money better and pay off your overdraft within the stipulated time.
Furthermore, once you have established how much you owe to the bank, you need to create a monthly budget to know what your expenses are and how much money you spend on each item or service. Having basic financial knowledge can help you avoid tricky situations such as owing an overdraft.
- Resort to your savings – If the situation ever arises that you cannot pay back your overdraft in time, you can turn to your savings to pay off the bank loan. Savings are essential for providing support for you during times of need, and this is precisely one of those moments. It would help if you used your savings to pay your overdraft because the more you keep the overdraft on hold, the more the interest rate will increase over time, and you will owe a lot more money.
Have you heard of a zero percent overdraft?
This has recently been launched by a few banks, such as Nationwide’s FlexDirect. The offer is for a zero percent loan, but this is only valid for one year, so if you are confident that you can pay off your loan within a year, then this is the perfect option for you as you do not need to worry about paying off any interest charges.
Open a new bank account
This may seem like the opposite thing to do when you have an overdraft that is owed, but by simply opening a new bank account with a different organization, you can manage your overdraft much better because the new bank account will have only the money that is available for daily expenses and income, while your other bank account only has the overdraft that is yet to be paid. As a result, these two accounts can help you manage and pay off your debts quickly.
Is it possible to obtain a loan from another bank or company so that I can lower my overdraft?
The simple answer is yes. If you can obtain a loan from another organization, this would be a great alternative to lowering your overdraft. In addition, the interest rate for this new loan would be lower than your current overdraft.
However, if you decide to go for this option, you must inform your bank to lower your overdraft limit to zero so that you are not able to overdraft your account again, which will end up even worse because you may then have to pay two loans.
Is my bank able to help me lower my overdraft?
If all other options above of lowering your overdraft fail to succeed, you can always turn to your bank as a last resort and talk to the financial experts who work with you to grow your income.
Often, banks can help their struggling customers who cannot pay back their loans or overdrafts by offering them a lower interest rate for the overdraft that is owed. This is possibly the best solution to paying back your debts because other than this, you have no choice but to pay back the loan or go to court for it.
Conclusion
In conclusion, yes, it is possible to lower your overdraft, but this will take an additional effort from you to implement measures such as using your savings or even opening a new bank account that will help you manage your finances a little better. Lowering your overdraft can also be done by talking to your bank to see what they can do to help you; after all, you are using their services, so they are responsible for your finances.
Therefore, if you can, it is always best to avoid getting an overdraft because you will pay a lot more money in interest than you already owe. In addition, it is recommended to hire a personal financial advisor so that you can seek better financial advice.
The following section of this article will answer any FAQs about how you can lower your overdraft.
FAQs:
- How can I reduce my overdraft limit?
You can decrease your overdraft by slowly paying off your debts every month and using your savings to pay off the overdraft. It is suggested not to go into an overdraft as this will bring future payment complications. It is best to practice never borrowing more money than you earn.
- Can you move your overdraft to a credit card?
Yes, this is possible if you have a full-time job and are paid monthly. Moving your overdraft onto a credit card will enable you to pay zero percent installment fees. Typically your credit card issuer will give you an interest-free period where you can pay off your loan.
