What is your overdraft costing?
Posted on Apr 10, 2024Did you know overdrafts are now one of the most expensive forms of debt, so what is your overdraft costing you?
Many people rely on their overdraft. It’s estimated that around 19 million people use an arranged overdraft each year, whilst about 14 million people use an unarranged overdraft each year.
So, if you have an overdraft, read on, and make sure you’re aware what your overdraft is costing you.
How much is your overdraft costing?
Most banks and building societies charge an interest rate between 30% and 40% for overdrafts, but it could be as much as 50% for some.
It’s also worth noting that in most cases the rates are ‘representative APRs’, meaning you might be paying even more as only 51% of accepted applicants need to get the advertised rate. Banks can also charge some customers a higher interest rate. For example, some banks say “Your interest rate will be based on how you manage any accounts you have with us and on the credit information we hold about you”, so people will pay more.
Swap & Save Loan
According to Moneysavingexpert.com getting a loan to pay off an overdraft is ‘a decent option, as it’s likely to have a cheaper interest rate than your overdraft’.
A Retail CU Swap & Save Loan could be significantly cheaper for long-term overdraft users. And at Retail CU we use fixed APR, so the rate you see is the rate you get.
For example: A £3,000 Swap & Save Loan at just 16.9% APR, total interest would be £515, if repaid over 24 months. Borrowing £3,000 at 39.9% APR over the same period and repay £1,168 in interest. By choosing a Swap & Save Loan, you could save more than £650!
A Retail CU loan, with bite-sized repayments straight from your pay, could help you get out of your overdraft and save you money too!
Try our Swap & Save Loan calculator to see how much you could save!
Representative example
Monthly repayments – Borrowing £3,000 over 24 months will cost £146.46 a month. Total amount repayable is £3,515.03 at 16.9% fixed APR.