You will often hear people saying that they want to pay off their debts quickly and also might even here professional advice encouraging it as well. However, you might wonder whether this applies to all debts and if you have an overdraft may wonder whether you should be paying that off as quickly as you can. It is good to think about this as it could make a big difference to your financial future.
Advantages of Repaying the Overdraft Quickly
An overdraft will cost you money. Most overdrafts will charge interest of between 35% and 40% which is a lot of money and the longer you stay overdrawn the more it will cost you. It is therefore sensible to repay it as soon as you can and then you will not be paying out so much money. It is also a good idea to think about the fact that once you repay it, you will have the overdraft then available to you if you need the money in an emergency. It is reassuring to know that the money will be available to you if you need it and therefore knowing that you have not used up all of your overdraft or even any of it can give you peace of mind. Of course, it may not be that easy to repay it, but there are things that you can consider that will help you.
Tips on How to Achieve This
Your overdraft will be repaid when you put money into the current account. This means that it is reasonably easy to do it and you will not have to worry too much about how to get the money actually into the account to pay for it. However, finding the money is a different matter.
It could be that your pay goes into that account and if it does then the overdraft will be repaid when you get paid, however, some people do not have their pay going into the account here they have an overdraft or they pay it off and then get overdrawn quickly again or perhaps their pay is not even enough to repay it. In all of these situations, it is wise to think about alternative methods for repaying the overdraft.
It can be good to start with thinking about the amount of money that you are spending. Check out all of the things that you are buying and think about whether you can spend less on them. You might be able to switch retailers, brands, providers, insurers etc and pay less money. It is worth looking into everything you buy because if you can save a little bit here and there it could add up to make the difference between you managing to pay for everything you need and you struggling to pay for it. Also think about whether there are things that you are buying that you do not really need. Think about whether it might be possible for you to cut down on these items and you will be able save money. It is not always easy to do this, but it will not have to be forever. If you can cut down a lot until the overdraft is paid off then you will be in better habits to hopefully mean you will not get into the habit of overspending again. It can also be wise to think about whether there are any ways that you might be able to earn a bit more money which could help to repay that overdraft even more quickly. Even a bit of freelance work, some online work etc could add up to make it worthwhile.