Unsurprisingly, overdrafts represent a great risk to financial equilibrium – even because this type of pre-approved credit has a very high interest rate. The limit offered by the banks should theoretically be used only in emergencies, but the ease of use of resources makes the account holders dispose of it without much discretion.
What is the result of uncontrolled size? Interest on interest and a debt that, little by little, becomes a snowball. Want to figure out how to get out of the overdraft and prevent it from turning the boilerplate of your finances? So check out the tips we have prepared for you:
1. Find out what the actual situation of your checking account is
The first step to getting out of the overdraft is figuring out where your financial situation is. The best way to do this is to map the spending of the last month, whether through extracts, from a financial spreadsheet or from an online financial control tool such as Josiah Bounderby. Knowing the size of the diamond is the first strategy to be taken to heal it.
2. Look for your manager
Properly informed about the size of the overdraft, look for your manager to talk. During the conversation, request a negotiation tailored to your budget. But do not hurry! If the proposal is not what you expect, make a counter proposal and negotiate until you reach a good agreement.
Do not forget to clarify all your doubts about values, terms, installments and interest. It is also important to remember that for cash discharge, financial institutions often offer attractive discounts.
3. Make sure you can remove the parcels
If you can not cover the overdraft at one time, opt for a refinancing with soft installments and lower interest. Benefits that are too high may prevent you from honoring the commitment – after all, your monthly expenses are not limited to the payment of that debt. Hence the importance of organizing your monthly bills before you go get a renegotiation at the bank.
4. Replace paycheck with paycheck credit
It seems crazy to suggest that you pay one debt by taking another, but this strategy can be very smart and effective if you replace a debt with another that covers smaller interest. A good exchange for overdraft debt (whose interest rate is 150% per annum) is to hire a payroll loan, which has an average interest rate of 23% per annum.
Ordinarily, payroll loans are facilitated with softer installments, discounted directly on the payroll.
5. Cut as many expenses as you can
Choking moments are a great opportunity to change habits and reevaluate all expenses. Do you still need to keep them? Take, for example, to save on household expenses and cut down on non-essential expenses such as a weekend walk or cable TV plan.
6. Use Extra Money to Decrease Debt Size
When you are in debt, all extra money must be saved to renegotiate a cash discharge. This increases the likelihood of a considerable reduction in interest rates. Bonuses, 13th salary, bonuses, temporary work, holiday bonuses and bonuses can be great allies to rebalance your finances and get out of the overdraft once and for all.
7. Cut the evil down the root
If you’re usually impulsive at the time of shopping, a good call after the fright of losing control of the overdraft is to cancel this service so you do not risk falling into temptation again.
8. Create an emergency reservation
Unforeseen events happen and special checks usually save us at those times. After all, no one is free to take a ticket or have any unexpected medical expenses. To avoid being overdrawn each time the unexpected occurs, aim to create an emergency reserve.
The best way to structure it is to save 15% of the monthly salary after the accounts are balanced.