How Much Can I Borrow Using Overdrafts?
If you need to borrow money, then it is very likely that you will have a specific amount in mind that you need. This can vary a lot between different people and different situations of course and it will be one factor in determining whether you will be able to use this particular way of borrowing.
How Much Can You Borrow?
There are lots of different banks that offer overdrafts and they will all have different ways to decide how much they will lend to you by way of an overdraft. Some will lend all customers the same amount, but it is more likely to be the case that there will be some that will let different customers have different amounts. This means that you will need to do some research to find out. It could be that a bank will do a credit check and then decide how much to let you borrow based on that. So, if they feel that they can trust you, they will lend you more money compared to if they feel that they cannot. Some may not lend to you at all, it will all depend on what determinants they have with regards to deciding if they feel they can trust you to repay or not really.
The amount that you can borrow may also be determined by your salary and it might be put up or down once you have the overdraft for a while depending on how you use it. It can therefore be a bit difficult to work it all out. It is probably a good idea to therefore contact the banks that you are thinking of using and then you will be able to ask them about how much they will be likely to let you borrow and whether that amount is likely to change. Then you will have a much better idea of whether it will be enough money for you.
Is it Worth Borrowing this Much?
But, before you rush in and start to borrow money, it is a good idea to make sure that you think about whether it is worth doing. Start by considering the cost of borrowing and whether it will be worth paying out that money. It is a good idea to find out how much interest you will be charged on the borrowing and calculate how much you would actually be paying out each month or year if you used an overdraft and that will allow you to think about whether you will feel that it will give you good value for money.
Also think about the amount of money and the fact that you will have to repay that much money. You need to consider how you will repay it and how quickly. The longer you leave the debt for, the more expensive it will be and paying all the interest payments will mean you have less money to actually repay it. Also, if you borrow a lot, it will be harder to repay and it could also be daunting to see that you owe that much and that stress will not be good for you either.
Having money available to you like this can also be very tempting. You might think that it is there for you spend and that you deserve to treat yourself. Then you will have the problem of having to repay it and it might be very hard to find the money and you will be paying out the interest too.
So, it is worth thinking hard about overdrafts, not only on how much you need to borrow but on whether you should be borrowing at all.