An overdraft is something that many people use when they run out of money. They will continue to spend money from their current account, perhaps using a debit card or drawing out cash even though they have nothing there and go overdrawn. Overdrafts can be an expensive way to borrow money though and so it is worth making sure that you have the best one.
How to get an overdraft
An overdraft is something that we will often get offered when we open a current account with a bank or building society. If we have a good enough credit record, they may offer the opportunity to borrow a sum of money whenever we want, if we need it. It can seem like a great way to get a bit of extra money and we do not even have to worry about paying it back as it will be automatically repaid when money gets paid into the account. This certainly makes it convenient but it is not cheap. All loans have costs of course, but an overdraft can be on the pricey side. You also have to agree how much you will borrow up to with the bank or building society. If you borrow more than this they will charge you much higher fees. It is good to know exactly how much you can borrow up to and how much you will pay for this as well as how much extra you will pay if you withdraw more than you have agreed.
You may be able to arrange a larger overdraft with the bank, but you will have to ask them and see if they are prepared to let you have more. They will all vary slightly in the criteria they have for overdrafts and so you will need to ask in order to find out whether they will be happy to offer you a larger one or not.
How to compare overdrafts
Comparing overdrafts is a case of comparing current accounts. You should be able to find out how much the overdraft will cost you with different banks and building societies. You may have to speak to them personally if you want to find out exactly how much money they are likely to let you have as an overdraft. You may even need to check how much they will charge as often the advertised rate will not be the rate they offer to everyone as it can depend on your credit record. However, it can be well worth comparing them, especially if you use your overdraft regularly as a cheaper overdraft could lead to significant savings in the long run.
As well as comparing the overdraft costs, there are other things that you need to be aware of as well when you are comparing current accounts. There are often many more services that a current account provides as well as an overdraft facility and you need to make sure that the one you are considering will provide the same for you. It might be that you pay a fee for your account and get some benefits such as free insurance or other reduced or free items and you need to consider whether this makes up for the dearer overdraft cost or not. It may be that you have a local branch that you like to go into. It could be that you use their online banking and want to make sure you still have this facility. You may also want to consider things like how good their customer service is and their reputation. You may also want to check that you can make cash withdrawals form the same places, you will get a debit card that is accepted in the same places and things like that. Consider all of the features that you use at the moment from your current account and ensure you will be getting those from the new one.
How to change your overdraft
So if you do find an overdraft that is cheaper then you will need to switch your current account across to that provider. This could sound really difficult, but these days it should not be. They should be able to automatically transfer over your direct debits and standing orders so you will not have to worry about doing, although you may want to check that it has been done properly. You will to provide your new bank details to your employers so that your salary goes to the right place and anywhere else that you receive payments form or pay to, that is not set up as a direct debit or standing order. Despite there being a few things to do, it should not actually be that difficult or take that much time and if you can save a significant amount of money then it could be well worth that small effort.
There are many lenders available for us to choose form when we are taking out a loan. Even when we have a specific loan type in mind, there will still be lots to pick from. You will find that there will be some that you have heard of and some that you have not and so you will have to think about how to choose. There are many criteria that you might look at but finding one that is trustworthy is probably high on most people’s requirements. But how do you find out if a lender is trustworthy?
Ask friends and family
It is really useful to talk to friends and family about where they bank, borrow and generally get their finances. It can often be a bit of a private matter in some families but there is no need for this. You do not need to know how much they borrowed or even if they are in debt or how much money they have. It is important though to find out whether they would recommend any lenders or even advise you to avoid some. It is understandable that you may not like to tell them that you are borrowing money but you could just say you are comparing different financial institutions and would anyone be able to make recommendations. You will then be able to find out more about different ones which could help you to decide who you might trust and who you may not. It is important to try to find out why they had trouble with certain ones as it may be for reasons that you feel are unimportant or that might be irrelevant to you.
The reason that asking friends and family is so important is because they are unlikely to be biased. Once you start searching online you can never be too sure as to whether the opinion you are seeing is genuine or true or that belonging to someone who has an interest in the company such as a shareholder, owner or employee.
Look at their website
Looking at the lenders website can reveal quite a bit about them. You will be able to get a feel for the company and their culture as well as getting more familiar with the types of products that they sell. It can be interesting to see if it allows you to find out any more information about them which could help in your decision as well. You might be interested in when they set up and what products they offer and things like that. You may also want to check their SSL certificate to see how secure the site is and whether they offer secure transactions and things like that. You would expect a lender to have the most secure type of website.
Find reviews online
You might be able to find reviews and information about the lender online. There are many websites specialising in finance and some of them will review different lenders. There will also be message boards and forums where people discuss this sort of thing and this might be useful as well. It can be good to gather as much information as you can as it will allow you to build up a picture of what the lender is like to deal with. Again, like with talking to friends and family, try to find out why people have the opinion that they do as their reasons may not be things that are important to you.
Contact them directly
It can be really useful to actually contact the lender yourself. So once you have drawn up a short list, based on the information that you have gathered, you can get in touch with some of them. It is a good idea to thin about how you would normally want to communicate with them. Some people like face to face, some online and some telephone. Consider what you would rather do, so if the lender offers this and try it out. It will be a good idea to ask them questions and see not only how polite and friendly they are but how well they answer. Asking them how much they would be prepared to lend and at what cost could be worthwhile, checking how many repayments there are and how much each one will be, can also be useful. There may be other information that you would be interested in finding out as well and so you can ask too. You can then compare them, not only on the information that you find out but how well they explained it and how quickly you got the information. Of course, if you have emailed one lender and phoned the other the response times will be different, so try to find a way to compare them fairly.