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Student Overdrafts—An explanation
What is a Student Overdraft?
It is where the bank allows you to go overdrawn with their permission without incurring charges or interest. Most student Overdrafts are “interest free” for the period of your studies. You will have to pay the amount back and you will have the debt of an overdraft. However, you will not be charged interest on your overdraft while you are still studying.
What happens if I am overdrawn and my student loan goes in?
If you £250 into your overdraft and a student loan of say £1215 goes into the account then your account will be +£975(that is £1215 – 250).
When do I have to pay back the overdraft?
Once you have completed your studies, the bank may transfer the account onto a graduate account. That may involve either an interest free amount that then goes down over the following few years or may have interest to pay immediately at a preferential rate. You need to make sure you are fully aware of what your banks' terms and conditions say in relation to this. Furthermore, if you continue your studies, it is imperative you make the bank aware of this as they may be able to extend the terms of the student account prior to converting your account, which is done automatically.
The idea behind this is that when you complete your studies you will be working and therefore have less outgoings than you had while at university study. Your wages coming through on a monthly basis rather than a quarterly basis.
Can I have more than one student overdraft?
The answer is yes but remember that you are also increasing your debt while at university if you use both of them. The bank could at any point demand repayment of the overdraft as they would be within their rights to do.
What is a Student Overdraft?
It is where the bank allows you to go overdrawn with their permission without incurring charges or interest. Most student Overdrafts are “interest free” for the period of your studies. You will have to pay the amount back and you will have the debt of an overdraft. However, you will not be charged interest on your overdraft while you are still studying.
What happens if I am overdrawn and my student loan goes in?
If you £250 into your overdraft and a student loan of say £1215 goes into the account then your account will be +£975(that is £1215 – 250).
When do I have to pay back the overdraft?
Once you have completed your studies, the bank may transfer the account onto a graduate account. That may involve either an interest free amount that then goes down over the following few years or may have interest to pay immediately at a preferential rate. You need to make sure you are fully aware of what your banks' terms and conditions say in relation to this. Furthermore, if you continue your studies, it is imperative you make the bank aware of this as they may be able to extend the terms of the student account prior to converting your account, which is done automatically.
The idea behind this is that when you complete your studies you will be working and therefore have less outgoings than you had while at university study. Your wages coming through on a monthly basis rather than a quarterly basis.
Can I have more than one student overdraft?
The answer is yes but remember that you are also increasing your debt while at university if you use both of them. The bank could at any point demand repayment of the overdraft as they would be within their rights to do.
