Using your overdraft

Many student bank accounts will allow you to use an arranged overdraft amount without having to pay interest. This means you can borrow money from the bank without having to pay interest on what you borrow, this is called an interest free overdraft.

If you do not have a student bank account you are unlikely to have an interest free overdraft available or if you do it will be for a smaller amount of money such as £250.

Interest-free overdrafts can be helpful as bridging support between maintenance loan instalments and are often a safer option that using other short-term loans.

However, they are still a loan and need to be paid back. If you fail to pay back an overdraft payment or often go over your arranged overdraft without prior agreement from your bank this will effect your credit score long term.

Although there are ways of improving your credit score in the future having a poor credit score can effect you being able to apply for credits cards or other loans in the future.

What can I do if I am having problems using my overdraft?

If you are often in your overdraft or you are using so much from your overdraft that you are constantly in a cycle of paying off your overdraft you may need to make a change.

·      Make a budget. Making a budget can help identify areas where you may be overspending and what essentials you need to cover. There are lots of way you can approach making a budget but as a basic, it starts with reviewing what you are spending and what income you have. You can find more information about making a budget on our page here.

·      Look for a part time job. You can find more information about finding a part-time job here.

·      If neither of these solutions work for you and you find yourself in financial hardship you may want to consider applying to the Success for All Fund. You can also speak to our Advice team by filling in our enquiry form here to discuss a Success for All application or for more money management guidance.

What happens to my overdraft once I graduate?

Once your university course is finished, normally your bank will convert your student account automatically into a graduate account. Most graduate accounts will have some amount of interest free overdraft however this usually decreases year on year to encourage you to pay your overdraft over.

However, this is not always the case so it is very important to check your accounts overdraft terms ahead of when you graduate to be sure you are not expected pay your overdraft back immediately and that you still have interest free overdraft. Otherwise, you could end up with significant debt accumulating once you graduate.