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An overdraft is something that we all have during our education, especially throughout college and university. Once you have finished University, people find it difficult to get out of their overdraft. However, it would be best to remove your overdraft completely once your career is underway as it can lead you to paying commission per year. Some people have multiple overdrafts and that leads to more debt. If you are struggling to pay off your overdraft then this is the perfect solution for you.
Budget and Gradually Repay Your Overdraft
There are many things that you can do but the best method would be to budget. Budgeting is proven to be one of the most effective ways of saving so this is essentially the same thing. You can create a budget by either using an app or by creating a spreadsheet.
On the spreadsheet, you write down all of your expenses, including the fees for Netflix and Amazon Prime. You will also need to include essential living costs such as your water and electricity. You will also need to include the money you spend on food.
Each month, you should look to save money elsewhere. This could be choosing a cheaper gym membership, deleting a subscription you no longer need or, choosing a broadband package that is cheaper than your current deal.
Tips for budgeting
When you’re budgeting, you should always over-estimate rather than under. Change the dates on your direct debits so they all come out at the start of the month. Include annual and quarterly subscriptions. Including putting money away for birthdays and Christmas. Additionally, set a certain amount you should pay off each month.
Use Your Savings
Building a savings account is good but if you have an overdraft, you need to consider paying this off first. Yes, a savings account is good but the interest that you are paying on the overdraft will hold you back in growing that savings account. Before making any large financial decisions such as a holiday, avoid this and consider putting that money towards your overdraft instead.
If there is plenty of money in your savings, use that money so you can pay off your overdraft. This will benefit you more in the long run.
Once your overdraft is paid off, allocate more money to your expenditure each month to help increase your savings again. Remember, the more money you have in that savings account, the more interest you will gain so ensure you are increasing it as much as you can.
Move To An Interest-Free Overdraft
The cost of an overdraft can be very expensive, depending on your provider. If the interest on your overdraft is extremely high then you should consider moving it to an overdraft that is interest-free. This will allow you to grow your wealth more and pay off the overdraft quicker. An overdraft repayment can cost you hundreds of pounds throughout the year.
It is worth mentioning that if you move your overdraft to an interest-free overdraft account, this may only be temporary. As long as you are confident that you can pay off the overdraft before your interest fee expires.
Move Your Overdraft Into A 0% Money Transfer Credit Card
Another method to pay off your overdraft is to transfer your overdraft into a 0% money transfer credit card. You have to make sure you can pay off your credit card debt within a certain period. 0% interest can only last for a certain amount of time, usually 28 months. Check with the credit card to see how long the interest-free period will last and ensure you can pay off your overdraft debt within that period.
Try To Increase Your Income
If you are struggling to pay off your overdraft, it may be worth considering getting a new job that will increase your income. Additionally, you can get a side hustle that will help you earn additional income as well. All of this will help you get out of your overdraft.
If you enjoy the job that you are currently working out, consider a temporary job on the side. Freelancing a digital product, web design/development, graphic design, photography or anything else that can earn you money without a contract will be good for you to earn more money.
Finally, Seek Help From Your Bank
If you are struggling to pay off your overdraft due to other debts then you should speak to them. They may be able to help manage your debt more effectively. Additionally, they may be able to waive or stop the interest payments. If they cannot provide you with the help you need then they will likely pass you over to a debt advisor. They will discuss your various options and provide you with a debt management plan that can discuss your options to help pay your overdraft and other debts.
