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Paying interest on overdraft, I'm confused.

(5 Posts)
ElizabethLemon Mon 12-Jan-15 14:01:57

I currently have a graduate account with natwest which includes a £2000 agreed overdraft. When taking out this overdraft I was told that after a certain amount of time if I didn't decrease the overdraft to £1000 I would have to pay interest. All fine, that time has come and sadly I'm not in a financial position that will allow me to pay off the£1000. But I have set up a repayment plan, paying off £100 a month for 18 months.

What I can't work out is how much interest I'll be paying?! Interest rate is 17.8%. My calculation is 17.8% of 2000 is 3 hundred and 50 something. Surely I won't be paying that every month?! I can't, it almost half my wage. Am I being totally stupid? Well I know I am but can someone explain how the interest payments will work?

I did ask the man on the phone when I was setting up the repayment plan but he said he couldn't tell me about interest payments until the 1st payment was coming up (beginning of Feb).

Rockchick1984 Mon 12-Jan-15 14:37:51

The interest rate is annual, and based on the amount you actually use. So if you used the full £2000 every day for a year, you would pay £350ish, so £30 a month. If you use it less then you will pay less.

Also check if its just £1000 that you'll be paying interest on, if the first £1000 is still interest free then you can halve that amount again. Hope that helps!

ElizabethLemon Mon 12-Jan-15 19:18:06

Thanks so much rock. I think I knew in the back of my head that that must be the case but was getting myself into a state! Off to to do some budgeting now to find that extra £130 a month confused

caroldecker Mon 12-Jan-15 20:44:20

17.5% is a high rate of interest - can you get a 1 year loan at a lower rate? If, say 5% loan repaid over a year, then you would save £20 a month

caroldecker Mon 12-Jan-15 20:44:28

17.5% is a high rate of interest - can you get a 1 year loan at a lower rate? If, say 5% loan repaid over a year, then you would save £20 a month

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