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Do you really need an overdraft?

The overdraft has become commonplace across the UK with many banks looking to tempt new customers who will ultimately be unable to repay their debt and stay with the bank indefinitely. Even though the vast majority of people in the UK are more than capable of using their overdraft facilities only when required, more and more people view these as a part of their everyday credit facilities which has seen debt levels continue to rise.

Before you accept the offer of an overdraft, often via an invitation from your bank, you need to consider whether you actually need one and how you would use it. If you believe you would push your overdraft limit on a regular basis then maybe you need a short to medium-term loan to put your finances back in order, because an ever-increasing overdraft facility can be called in immediately. The vast majority of people with active overdrafts would not be able to repay the amount in question if for some reason they were called in by their bank.

It is worth remembering that while you may be up-to-date on your overdraft payments and you may have kept within the limits from day one, if your bank has a change of strategy they may consider calling in "good debt". Do you really know the small print and terms and conditions of your overdraft facility?

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