Do you have an Overdraft?Posted on Apr 06, 2023
Did you know overdrafts are now one of the most expensive forms of debt?
Many people rely on their overdraft as a convenient way to help with short-term cash-flow issues and unexpected costs. An estimated 35 million people use their overdraft every year. In 2020, bank overdrafts underwent a major shakeup. The financial regulator, The FCA, wanted to make overdrafts easier to manage and fairer for all, however it is now estimated that 8 million people are now paying more for their overdraft than ever before!
How much is your overdraft costing?
Most banks and building societies charge an interest rate between 30% and 40% for overdrafts, but it could be as much as 50% for some.
Some banks and building societies state “Your interest rate will be based on how you manage any accounts you have with us and on the credit information we hold about you”, so people with bad credit record will pay even more!
What to read more about what changes were introduced and how variable interest rates might be affecting you? Check out our blog post on what is your overdraft is costing you here.
Could our Swap & Save loan help?
According to Money Saving Expert getting a loan to pay off an overdraft is ‘a decent option, as it’s likely to have a cheaper interest rate than your overdraft’.
Our Swap & Save loan, with a rate of 13.5% APR is a lower interest rate than a 39.9% APR overdraft (but remember, you may be paying more!). These rates could be significantly cheaper for you if you regularly use / dip into your overdraft.
For example: with a £2,000 Penny Post Swap & Save loan to pay off an overdraft, total interest would be £275.25 if repaid over 24 months. Borrowing £2,000 at 39.9% APR over the same period and repay £784 in interest – a saving of nearly £510!
At Penny Post we use a fixed APR, so the rate you see is the rate you get!
Tidying up your finances and consolidate your borrowing into one regular, manageable repayment could save you money.
If you have a £2,000 overdraft at 39.9%, a £6,000 personal loan at 18%, and a £2,000 credit card at 27%, totalling £10,000, repayable over 60 months, would mean you would repay £8,500 in interest alone!* However, you could apply for a £10,000, repayable over the same period, Swap and Save Loan and pay just £3,559 in interest. A massive saving of nearly £5,000!
Juggling multiple repayments can make your finances complicated. Tidy up your finances and consolidate your borrowing and apply for a Swap & Save loan now! Try out our easy to use loan calculator to see how much you could borrow and how much you would repay.
*Interest rates taken from Money Saving Expert – Official APR Examples