Drying loan options empower overdraft

London(online-unsecured-loan.co.uk) May 3, 2008:The amount borrowed on overdraft facility has suddenly spiked, following a steady fall since May 2007. Then, borrowers had owed £10.2bn as overdraft. However, almost £1bn had been wiped off this debt by February 2007, only for it to suddenly increase by £217m in one month, to £9.6bn in March, according to figures from the British Bankers' Association(BBA). Banks and building societies have been cutting back on the amount they are prepared to lend to customers wanting a personal loan or unsecured loan. The best rates, with the longest interest-free periods, are being made available only to those with a perfect credit score and capacity to pledge security.

The credit crunch, combined with rising bills for food and fuel, has meant borrowers have also been getting wary of taking on too much unsecured borrowing from too many financial organisations.

As a result, they are turning to their current account for any external monetary assistance they need. The bank is much more likely to give credit because it knows the intimate details of how much the borrower spends each month. However, there is a downside as overdrafts do not have the best borrowing rates, and the borrowers are much more likely to get a better rate elsewhere.

For example, the best authorised overdraft rate one can get is from Nationwide BS at 9.9%. Although Alliance & Leicester does have a rate of 0%, it will bill 50p per day from the date the amount is overdrawn.

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