Jolly Green Monster 2

How does the bank work out what interest you owe them for your overdraft?

I have an APR and a monthly rate..

So for easy figures say it is 10% per month do they look at the max you were in it for the month say £2000 and charge you 10% of £2000?

Or do they work out the daily interest and charge to that at the end of the working day?

Help!

Thanks very much

Not so JGM

Jolly Green Monster 2

I cannot be the only person needing an overdraft can I?

JGM

Mungo

I'd guess it would be the second way. Don't forget the APR is an annual rate, so you need to pro-rate to get daily interest amount - e.g. take 10% of £2000 = £200 and divide by 365 = £5.48 for the daily amount.
However, you could always ask the bank for an explanation.

MarkO

Most will do it monthly, and charge for the maximum you were overdrawn (i.e., the facility for the month). Very few will calculate interest daily.

If you know you're going to need to borrow, you'd almost certainly be better off taking out a short term loan, as the rate will undoubtedly be lower.

Can you draw down funds from your mortgage? That'll be cheaper still.

Jolly Green Monster 2

It is amazingly cheaper to have an overdraft..

This is company rather than personal so I don;t want to borrow off my mortgage etc..

Overdraft rate is 10.08% loan was 10.25%..

Because of money coming in and out I should only be overdrawn a bit... say £2000 but I'd need about £5000 on a loan so would definately cost more.

Thanks for you help as that has just reasured me that it is not going to cost a bomb.

JGM

MarkO

Why not get a personal loan, and lend it to the company? You can get unsecured loan rates of < 9% these days, and I believe you'd get tax relief if it was 'investment'.

Jolly Green Monster 2

Have thought about it but then my accounts get slightly more complicated and then my accountant will charge me more etc..

I just need the buffer of the overdraft to get me out of the poo for a few months.


JGM

carl

If you're looking to pay back fairly quickly, you could just transfer it into the company from a credit card.

Jolly Green Monster 2

Looked into it but the interest rate is higher than the overdraft.

Just wasn't sure how they worked it out.

Cheers

JGM

carl

It's only higher if you use one credit card.
Transfer money from CC1->company
Transfer debt from CC1->CC2, where CC2 gives low/zero rate on balance transfers

According to the ads, RBS do 2.9% on balance transfers and purchases at the moment.

Jolly Green Monster 2

Unfortunatly the transfer of funds to the company account would be classed as a cash transaction and a fee is charged and they start charging interest straight away.

So could do it and transfer it the same day..

Then only a small charge I guess.. worth thinking about but I think it should only cost me about £50 for the overdraft for the time I need it.

JGM