Overdraft Problems?

    • Thread Starter

    So,I'm starting uni soon and I'm completely broke. I have student loans but they're coming in quite late so is it a normal thing for people to just go into overdraft and use it?I have accomodation and a ton of stuff to buy, e.g. a laptop, so buying one into my overdraft is my only option at the moment really. Majority of my student loan gets paid in my 3rd installment.

    These are all just thoughts but I'm not sure if it's okay to do all that? Is it a bad habit, etc?

    Also, does it stop between summers or carry on interest free throughout your entire degree?

    Fine to use if you have it available.
    Carries on through your degree and until they change it at the end. They might move you to a graduate account.

    Accommodation and food.

    If you can, then pay it off during the Summer.

    This is an issue you are better off discussing with your bank and parents also. However, the bank can only advise you.

    I am with Lloyds and their planned overdraft scheme works like this:

    First 3 years you pay no interest to the sum of money you borrowed, however, after 3 years, if you have not payed the sum of money back, you then have to pay the sum of money you borrowed plus interest which adds on each year.

    This planned overdraft can only be used for 3 years on a student account, so if your course is a 4 year course, make sure you've have financial stability for that 4th year, so you don't have to use the overdraft then. Otherwise you will be paying the sum of money you borrowed plus interest, which would lead you into more debt.

    After your course has ended, your account then changes automatically to a graduate account. (The bank has these details when you go for a meeting with them).

    I cannot stress enough that if you do use want to use the overdraft, have a meeting with the bank first & plan the overdraft. Otherwise, if it's unplanned you pay interest regardless.

    & using the overdraft only turns into a bad habit if you use the overdraft for unnecessary things (e.g. Clubbing everyday/drinking/eating expensive meals). These are things which could lead you in further debt.
    Make sure you only borrow from the bank what you can realistically pay back, within those 3 years before the interest is added because this will help minimise the debt as you will doge paying the further interest..so budgeting is key, even with an overdraft.

    Make sure you have means to get out of it which is very tricky to do. Also it's fine spending £500-£1000 now on new laptops, clothes, ect but if you go to -£1000 and you get a loan of £1500 you're only gonna be £500 positive as any money going into the account pays the overdraft first so make sure if you do you can still afford your rent and living costs as well

    I think it's fine as long as you treat your overdraft as a way to fix cash flow problems... i.e. budget for the whole year regardless of how much money comes in when and then you don't need to feel guilty as you know the money will come back at some point, as long as it's within your year's budget

    be aware though that your overdraft may not cover all the expenses you need to start up, I don't know what you need and what overdraft you can get but it's not uncommon to be asked for the first terms rent, a deposit, buy kitchen stuff etc and if you need a laptop too you could be looking at a lot of money, my overdraft was only £500 at first
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