Paying interest on overdraft, I'm confused.

[ElizabethLemon]

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).

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!

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

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

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