Money

Paying off your overdraft after Graduating

Has the time come when you need to start thinking about how you’ll pay off your overdraft? In this article, we look at what you need to do and factors to consider.

The likelihood is that if you went to university, you had a student bank account. The tempting 0% interest overdraft is a great safety net while you are studying and the majority of undergraduates dip into it at some point.

Unfortunately, the bank won’t let you borrow money at 0% forever (we wish) and there comes a time when you have to start paying it back.

For those who manage to secure a job, the load might be lightened slightly by a regular income, but it’s still worth knowing what your responsibilities are and thinking about how exactly you’ll pay it off.

For those who have yet to secure a regular income there may be other ways to pay it off without being stung by huge charges.

Let’s take a look at what you need to know, what your payment terms are likely to be with the main high street banks, and how you can get it paid with the least possible fuss and worry.

Repayment terms at high street banks

Paying off student overdraftMost banks will offer an interest free period for graduates when they transfer from a student account to a graduate account. This tends to be anything from 1 years to 3 years. The longer term ones tend to be reduced every year, until you have no 0% overdraft facility left and you’ll be expected to pay interest at the current rate.

It’s important to note that the majority of large UK banks allow you to switch to another bank after graduating. Don’t feel that you are locked in or have to be loyal to your current bank at all. We suggest that you shop around in order to choose the best option for you.

If your overdraft isn’t paid off by the times set by the bank, you’ll be subject to extra changes depending on your account.

When checking the graduate bank accounts for your best option you may also want to check if they charge a monthly fee along with any other terms and conditions of repayment.

How to pay it off

Budget for the minimum repayment every month

calculatorWhen you’ve got a couple of grand to be paid off, it can all be a bit overwhelming. To make it more manageable, break it down into chunks by working out how much your minimum repayments are every month.

The maths: if you’ve got a £2,000 overdraft and two years to pay it off, that works out at £83.33 per month.

Set your budget accordingly and never forget to save this amount each and every month. Otherwise, you could find yourself in a much more difficult situation at the end of the repayment period!

Look at graduate bank account options

Your bank will often automatically change your student account to a graduate account, and you’ll receive the details of any changed terms.

As mentioned above, sticking with you current bank is the easiest option but it’s not always the best. Do some research online and find out which bank is offering the best deals for graduates.

Too many people stick with their bank just because they think changing is too much hassle. It’s actually really quite easy, and could put you in a much better financial situation.

Try to earn extra money

If you don’t have a job or a regular source of income then you may need to look at other ways of making money in order to pay off your graduate overdraft. It may be a last resort but you could sell some of your possessions or use some savings.

Saving money is also key and you can do this by living with parents and cutting back with your budget until you are happy that you have paid off all of your debts.

Consider a 0% credit card

credit cardsIf you’re reaching the end of your interest free period and your struggling to find the money to pay off your account then it may be an idea to take out a 0% interest credit card.

You’ll obviously still have to pay this back every month, but it’ll stop you from paying any steep interest rates and give you some extra time to find more funds. Even if you just end up saving a few pounds a week, it’s well worth doing.

Make sure that you carefully check the terms before you take out a credit card, and be careful of any small print. If the interest rates take a massive hike after your limited 0% period, you’ll need to know exactly when this is and think about what you’ll do next.

Once it’s paid off, think about closing it

Even when you’ve paid your overdraft off, many banks will automatically just keep it open for you to use in the future. If the interest rates are high, it might be a good idea to just close it straight away. Otherwise, the temptation to treat yourself using money that you don’t really have can be too much!

If you do need credit in the future, you could always reapply for your overdraft facility or consider options that could incur less costs, such as the 0% credit card that we’ve already mentioned.

You might want to look for accounts that offer you better interest on your balance or other perks such as home insurance too.


All the information surrounding overdrafts can be over overwhelming, but if you do your research and plan ahead, you’ll find that it can be manageable.

Have you sorted out your graduate finances yet?

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