Bank Overdraft Debts & Trust Deeds

About Current Account Overdrafts

Bank overdrafts are useful to cover emergencies and other short-term needs, but costly and unsuitable for longer-term borrowing.

An authorised overdraft is a current account credit facility provided by your bank. An unarranged (or unauthorised) overdraft is extra credit used without permission from the bank.

Operating a bank account that’s constantly overdrawn can be very expensive and banks can withdraw your overdraft facility at any time. Being overdrawn is therefore an expensive and potentially unreliable source of long-term credit.

If your debts repayments and overdraft costs aren’t affordable contact us for expert debt advice.

Overdraft Interest Rates Increased in April 2020

New rules about overdraft charges took effect on 6th April 2020.

Banks now typically charge a simple interest rate, rather than the old mixture of interest and daily fees. Banks aren’t allowed to charge you extra for unarranged overdrafts.

If you rarely go overdrawn this change might have saved you money, but for long-term overdraft users this change was often very expensive.

Overdraft interest rates were typically around 20% (plus other charges) before the new rules took effect.

Most UK banks introduced new interest rates set at around 40% APR. Lloyds and Bank of Scotland set the rate at almost 50% for customers with poor credit ratings.

If you have a large overdraft that you cannot clear, your monthly interest costs may have increased substantially in recent months. This makes debt much harder to clear and can leave people feeling trapped.