Overdraft Debts | Loan Debts | London

It is common for most of us to have an Overdraft facility in our bank accounts. When you apply for an overdraft your bank will assess your financial situation and if they decide they can offer you an overdraft they can (in some cases) charge you a fee for setting up the facility and (in some cases) apply monthly interest rates. Some overdrafts can be set up for free and are interest free, whereas some others can charge for the usage every month.

Banks will set an agreed limit that you are allowed to use in your overdraft but if you go over the limit they can charge you penalties and interest. For example, if your bank tells you that they offering you a “Free” overdraft, this means that they are not charging an arrangement fee and not charging you to borrow from them, however that doesn’t mean the loan is interest free. This means that you will still be paying an interest percentage (e.g. 20%) for the money that you use in the overdraft. So if your overdraft is at 20% interest you will be paying interest on the agreed loan amount for every month that you use it.

Then there are the overdraft penalties and charges. So say your overdraft is £500 and it ends up being overdrawn to £501, they will then charge you a penalty fee for exceeding your limit. For this example lets say the penalty is £20, this will then bring your overdraft limit up to £521, they will then charge you interest on £521 instead of £500. The banks can then also charge a monthly penalty fee for every month your overdraft is exceeding your agreed limit, and you will then be paying interest on top of that. So you can see how overdraft fees and charges can very quickly add up and spiral out of control.

Overdraft debt is a very common type of debt in the UK and in the London area. At Debt Advice London we offer free and impartial debt advice on overdraft debts, so no matter how high your debt is Contact Us today and let us help you out of debt.