Thursday 3rd of September 2009
An interest free overdraft is one way that people can obtain cash without the burden of climbing interest repayments, one website suggests.
New customers to a bank account may be able to get their hands on an interest free overdraft, which will usually last for a period of 12 months, according to lovemoney.com.
However, some Britons could feel that this is a short-term solution to the long-term problem of high levels of debt and may instead prefer to make significant headway into clearing balances with an individual voluntary arrangement (IVA).
Indeed, an IVA freezes the interest on unsecured debt such as credit cards, which could be a more sensible option than relying on an overdraft to keep a household financially above water.
And, as the website notes: "It’s very important you don’t exceed your zero per cent overdraft limit. Doing so will push you into an unauthorised overdraft - on which you’ll be charged horrendous rates of interest - typically [a] 20-30 per cent annual percentage rate."
Rather than risk going into an unauthorised overdraft with high levels of interest that could add to a financial headache, Britons may prefer to use an IVA to make a household more monetarily stable.
By Hayley Jones
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- IVA advice could be next step for cash-concerned credit card customers
