Overdraft Being Serviced But Not Reducing

[chrissa1]

I’ve just found out that my son has an overdraft with Barclays of £900. He is, and has been servicing this, by paying £50 each month. He doesn’t use this account at all, now.

The debt is not being reduced at all, with the charges that the bank applies each month.

What can he do? Thanks.

[TonyV]

Talk to the bank maybe close the account and then convert it to a low interest loan

[sapelesam]

Ask Barclay's if they can turn it into a personal loan. Two years at £50 per month would come close to clearing it.

[chrissa1]

Thanks for that, guys. I thought that there was new legislation that stopped banks doing this.

[sapelesam]

You don't have to ask Barclay's. If your credit history is OK get a personal loan elsewhere and pay off the overdraft. Just don't get a loan for anymore than you owe.

[chrissa1]

Thanks, sapelsam. The thing is, his credit score is not great even though he has no ccjs and has paid off every loan he has had.

[TonyV]

Well Chrissa1 should be no problems just talk to the bank. Funny thing is that until you have some sort of credit history that it can be difficult to secure a loan. Alternatively he could try and get a loan from a credit union e.g.
https://www.clockwise.coop

[fiction-factory]

Is he in a position to pay more than £50 a month. It's such an expensive way of borrowing he is effectively losing out on £50 a month. He should do whatever he can to repay it as quickly as possible. It may cause some short term pain but the debt could be cleared in less then a year and then he'll be £50 a month better off.

[chrissa1]

That’s the thing f-f, he’s not. He earns a good wage, but has two young children and I think after paying all the bills each month there is just nothing left to throw at the debt.

As I said, he’s determined not to default, and this is the most he can afford to keep them off his back.

[fiction-factory]

That's a shame because he may find he's paying £50 a month (£600 a year) for many years to come unless his financial circumstances change. And if interest rates go up, as expected. the repayments could increase.
If the money can't be found, ever by selling stuff on ebay etc or by making sacrifices for a few months (follow Martin Lewis advice), then he could look on the MSE website for the best loan deals so he can repay the expensive overdraft.
Things like changing his energy supplier or mobile phone contract, could save some money and switching bank account can bring in £125 cashback.

[chrissa1]

All good advice. I think I’ll get him to talk to Barclays, too.

[ummmm]

Does he have a good credit rating?

He could apply for a 0% CC.

[Hopkirk]

Pay it off for him, and tell him to pay you back £50 a month.

[chrissa1]

I would if I could, Hopkirk. I’m already lending him money to rent a new house because his marriage has broken down.

His credit rating is not great, Ummm but we’ll look into that.

[ToraToraTora]

so why is it not reducing? what are they adding each month? Intrerest of course but that should not be £50 so I suspect they are charging a fee for being over an agreed limit.

[chrissa1]

Bar Stewards.

[fiction-factory]

If you are having to lend him money for his rent and he already has an overdraft he can't pay off then i think he needs some free debt counselling. You say he has a good income but it is clearly insufficient for his expenditure. It's worth checkih whether he is getting all the benefits (eg who gets the child benefit if he has two young children who i assume he is having to support as you mention them) and whether his wife is paying enough of the bills or getting all her entitlements to welfare. Sometimes drastic action is needed- swap bank, swap energy supplier, ditch sky TV, sell car and stuff on ebay, no alcohol/cigarettes or holidays or nights out (not saying your son spends money on these), or the situation will get worse. What will happen when you can no longer help with his rent?

[chrissa1]

I’ve only lent him money for his initial deposit on a new house near my grandchildren, f-f.
We’re going to take this sad breakup as a chance to tackle his outgoings. His wife has never taken her share of the household bills.

[murraymints]

I agree..he really needs to go into speak with them..he may well be better converting O'draft to loan.

[murraymints]

the bank will see he is paying regularly I think that is in his favour...^^

[ummmm]

Poor credit isn't though. Looks like a better idea in principle but there's a good chance the computer will say no.