Banking | Finance

Overdraft

From April 2020 banks can only charge for overdraft using a simple interest rate, they are no longer able to (as before) add additional fees and charges. Currently these rates are set at 40% for unapproved overdraft. Where at all possible you should speak to your bank to agree an overdraft facility if you absolutely require one.

Loans

These are the top tips should you require at some point to apply for a loan, be advised that if your credit history is not at a sufficient level you may be rejected or need to pay a much higher interest rate than other loans in the marketplace.

1. Decide on how much you need to borrow and how long a period you want to pay it back
2. Check your credit history (there are several free sites available)
3. Shop around and compare, your current bank may not necessarily be the best option
4. The loan term matters – the longer you take to repay the loan the more you will pay back
5. Fix your interest rate, the ensures that your monthly payments will not change and you will be able to budget better
6. AVOID Payday loans, AVOID Payday loans (yes its mentioned twice for a reason!), interest rates are extortionately high and it is easy to fall into a trap of a cycle of debt.
7. Consider alternatives, if you only want a small loan look at interest free credit cards;
   • Remember not to use your new credit card for anything other than the original amount you need to borrow.
   • Make sure it is completely cleared before you start to be charged interest on your debt.
   • To make this easier it could be worth setting up a direct debit from your current account to your credit card, to make sure a portion of the balance is paid off automatically each month until it is cleared.
   • Make sure that minimum repayments are kept up until the balance is paid off.
   • Make sure you get a card with a long enough interest-free term for you to pay the whole amount off, otherwise this isn't a realistic option, and you may be better off going with a low standard rate credit card
8. Don’t automatically take out PPI with your loan