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I got a loan for £7500,if I increased my overdraft and paid off my loan would this be cheaper?
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I bank with Natwest and got the loan from them to. I have about £500c in bank at the moment and a £2.5k overdraft limit. I dont know if it would be cheaper for me to get a larger overdraft limit and always try and keep it in credit to pay off my loan with what I can?
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13 Comments
May 16th, 2009 at 11:55 am
Yes definatly
May 18th, 2009 at 12:31 pm
They will want to know why you want a large overdraft limit and if you told them what it was for, they would refuse. If you lie to get it, you will suffer in hell.
May 21st, 2009 at 7:35 pm
What’s the interest rate charged on the loan? What’s the interest rate charged on your line of credit overdraft? Will you continue to make the same monthly repayment amount? Do you need your overdraft line for emergencies?
May 22nd, 2009 at 3:32 am
The current Natwest interest rate on an overdraft above £5000, for ordinary current accounts is 15.93% EAR. Compare that to your loan rate before you make a decision.
I can’t see them approving such a big overdraft on a personal account though.
May 23rd, 2009 at 9:51 pm
It won’t be cheaper. Banks charge higher interest on higher risk loans such as overdraft.
May 26th, 2009 at 12:45 am
it depends on the interest rate, paying off the higher one forst is always the best idea.
May 27th, 2009 at 5:17 pm
check the overdraft rates, also if you pay the loan off, you may still be charged the for the interest. contact your loan company and speak to your bank.
May 29th, 2009 at 8:53 am
u need to find out what rate of interest you are bing charged for ur loan vs the interest rate for your overdraft. if you have an interest free overdraft facility available then u definitely should pay off your loan using the overdraft.
May 31st, 2009 at 5:11 am
First you should check the interest rates!
June 3rd, 2009 at 2:15 am
I don’t wish to be rude, but your last sentence does not really make sense to me. If you are keeping your bank account in credit and using any excess to pay off the loan, you won’t need a bigger overdraft limit.
You can explain by editing your question if you want to.
Either way your loan interest rate is almost certain to be smaller than the overdraft rate (ask the bank) so don’t use the overdraft facility unless you really have to, and certainly not to pay off the loan..
Use any “spare” balance in the bank account to pay off the loan bit by bit if they will let you do this.
June 6th, 2009 at 12:28 am
Like everyone else said you must check the interest rates first. I personally dont think its a good idea due to following reasons.
1. A loan is a formal agreement where you would know the what loan term and the monthly payments are but the overdraft agreements can be changed from time to time and the bank can suddenly turn around and tell you to pay it off within a few weeks. What would you do if that happens?
2.If you pay a high interest rate there are plenty of loans suppliers around such as Nationwide , AA finance, etc , and their interest rates are quite good. Its sensible to take out a loan with a low interest rate and pay off the high interest loan because overdraft interest rates are normally high anyway
June 6th, 2009 at 11:02 pm
Do not go by guessing. Find out what interest you are charged on the overdraft and how much on the loan and do what is cheaper for you.
June 9th, 2009 at 12:49 pm
to get an overdraft of that size is going to be very hard….there is a system banks use called the roll sytem which is caculated against the running of you accounts…how much money goes through your account how much activity etc. to get an od limit of 7500 is near impossible unless the turn over in your account is in the hundreds of thousands…..with your loan you could always shop around to see who is offering the best rates etc and maybe switch it to another lender….another alternative is to use the equity of your house to pay it off it means taking out a new mortgage get yourself an appointment with your banking advisor and ask them what is the best alternative for you…your bank should have one and they should be able to get you a free appointment so try that first