Wednesday, July 14th, 2010

What is the difference between an overdraft and debt?

debt
_ asked:


My husband has run almost £2000 overdraft and he says its not debt just an overdraft, nothing to worry about.

I am worried sick and I still see it as debt!

He had just finished paying a massive debt last year which took him over 10 years to pay off.

Now he’s started a small one without telling me. I made him promise to tell me if he had any problems with money which he failed to do so.

I helped pay off a few of his urgent debts in the past.

I can’t afford £2000 debt right now as things are different now we have young children and I’m unemployed.

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20 Responses to “What is the difference between an overdraft and debt?”

dsclimb1 Says:
July 15th, 2010 at 2:24 am

An overdraft is Debt that has been agreed with the bank.

If he went overdrawn by £2000 without their permission then it would be Debt with an agreement.

Either way you are probably better of without it, check to see what interest or charges he has to pay on it, there may be cheaper ways of clearing it.

alatoruk Says:
July 15th, 2010 at 2:28 am

debt is when you owe someone something.

an overdraft is an “allowable” owe to the bank, so you are right, it’s debt.

Ritch Says:
July 15th, 2010 at 9:16 am

Overdraft is a debt. At one point in time before you die you will have to pay it back.

If you are always at your overdraft limit you bank may review your overdraft and reduce it.

tom c Says:
July 16th, 2010 at 5:07 am

an overdraft must be arranged. this then allows you to overspend your account by a certain amount, and tyhen pay it ba#ck with little or no interest. Debt is where you overspend, but youb havent arraged with your financial institute to do that, so you go into debt and you have to repay it with interest.

vixen599 Says:
July 18th, 2010 at 4:00 am

an overdraft is an arranged loan as such with the bank and is not a debt, it is like havin a credit card and he will be charged interest on it, when money goes into the bank it will automatically come off th overdraft but will be available to spend with interest charged

Peter C Says:
July 19th, 2010 at 5:54 pm

Overdraft is when the bank lets you spend to a certain limit. Debt is over that limit

Marcus Says:
July 20th, 2010 at 11:58 pm

Debt in my book is outstanding money that cannot be paid back. In this day and age £2,000 is NOTHING. I have colleagues at work that owe 10,s of thousands.
The bank won’t bat an eyelid at 2,000, just don’t let it grow anymore.

tinkerbell_n_buttercup Says:
July 22nd, 2010 at 10:20 pm

there is no difference. a $2000 overdraft just means your bank account had so many bills trying to come out of it, that you now owe the bank $2000. It is still a debt. And quite frankly, i’m surprised a bank allowed that much of an overdraft to happen. Normally they would just deny payment. Banks don’t usually cover your *** to that degree. maybe $100, MAYBE, and there is also an overdraft fee. my bank account charges me $40 if i overdraft any amount. even if it is just 1 cent overdrafted, they charge me $40. so now i owe the bank $40.01, hypethetically speaking. sounds like your husband has some issues

Cap10kirk Says:
July 23rd, 2010 at 1:32 am

They are both debts. but an overdraft is arranged by the bank so that you can withdraw more than you have in your account. a debt is something you owe. Wouldn’t worry many business have overdrafts of many thousands!

Da ben dan Says:
July 24th, 2010 at 3:18 pm

overdraft and debt are the same thing…it’s all money that he owes.

PETER G Says:
July 26th, 2010 at 7:19 pm

This isn’t a good situation to be in, and I speak from experience here. 2k overdraft isn’t exactly gobsmacking, but with his history of bad money management it’s certainly not the path he should be going down, espeically as you have children.

Helping him to pay off old debts is a model you can now follow for your own strength: if he asks again for help with new debts, you can tell him “Look, I helped you before – now you’re on your own” – don’t forget that, by running up debts now after you’ve already helped him with old ones is actually quite rude. And the fact that he’s lied about it just compounds his addiction to being in debt (for whatever reason)…

There are positive things you can do, though – get rid of his access to various types of money (credit/debit cards) at least in the short term – tell him that he needs to clear his 2k debt (and it is a debt) before he can start using them again. And make sure that you log everything that happens – being unemployed and looking after children should also give you the perfect opportunity to look after money and the books as well, and help him get back on track and realise his responsibilities towards his family.

ebayphonehome Says:
July 28th, 2010 at 6:14 am

an overdraft is defintely a type of debt, like a loan or a mortgage. Debt is the overall term to describe owing money or things of value to someone else which will need to be repaid in kind. Therefore your husband is an idiot, you should have listened to your mother and not married him.

vanhammer Says:
July 30th, 2010 at 1:14 pm

An overdraft is a sort of debt that you owe the bank. It means that you took out more money than was available in yout account. And yes, you do have to pay the bank back.

T J Says:
August 1st, 2010 at 10:56 pm

Technically an overdraft is a debt (to the bank, or the payee).

A debt is a debt. An overdraft is where you draw out of your account an amount over what you have in it.

If you wrote a cheque to ABC, ltd, for 2000 pounds and the bank honored it, but you didn’t have the 2000 pounds (sorry, don’t have the symbol handy), then you would owe the bank 2000 pounds and that would be your debt to the bank.

If you wrote a cheque to ABC, ltd, for 2000 pounds and the bank did NOT honor it, then you would owe ABC, ltd., the 2000 pounds as a debt.

If the 2000 pounds was merely a deposit on something, then probably not be liable, as they didn’t really lose any money, but if you received a product (car?) or service as a result, then it was really to pay a debt and you owe ABC, ltd., the 2000 pounds and yes, it would be a debt.

tannedarse Says:
August 2nd, 2010 at 2:47 am

an overdraft is still debt no matter what way you look at it the bad thing is that when the bank want to stop the overdraft you have to pay it all at once no paying up or agreements they are/can be worse than loans and credit cards. tell him to ask the bank to reduce it by a certain amount each month untill its off, it saves any nasty suprises.

Jaimee1987 Says:
August 5th, 2010 at 3:29 am

if the bank has allowed you to go up to £2000 as part of an agreement, then its an overdraft. if you exceed an overdraft or the bank hasn’t given you one, then your in debt.

Mahal Says:
August 7th, 2010 at 10:32 am

An overdraft is technically a debt that is due immediately.

madge f Says:
August 10th, 2010 at 2:23 am

My bank allows me an overdraft of £500. If I overspend and some of my debt out does my monthly pension (paid in each month) I have the 500 to play with. If I then overspend more and go over the 500 allowed, the bank will start charging me £35 quid a time for going over the 500. I still at some stage have to reduce the 500 I’ve gone into as it is still owed to the bank, an overdraft is not a gift, it just helps one at bad times to ‘borrow’ from the bank without excess charges.

gozaine Says:
August 12th, 2010 at 9:00 pm

Are you confusing debt and loan. An overdraft is definitely a debt no doubt about that. It isn’t a loan. The difference between an overdraft and a loan is that a loan you pay back at an agreed monthly rate over an agreed period with an agreed rate of interest on the original borrowing. An overdraft is where your husband is dipping into the banks money and paying it back as and when he can. An overdraft is a much more expensive way to borrow money than a loan as the interest rate will usually be higher but the advantage is that you could pay it back as quickly as you wanted to. It doesn’t sound to me like your husband is going to be able to pay this money back any time soon so he would be well advised to speak to the bank about converting it to a loan. Do not be fooled by what you husband is telling you (and himself no doubt) a 2000k overdraft is most definitely something to worry about and an issue that must be addressed immediately. I think you husband has a bigger problem than this overdraft though. He seems to be a spendaholic and is obviously spending money without consulting you. You need to put a stop to it now if you don’t want to run into sever financial problems in the future.

When you are feeling calm and when the two of you have time to discuss the situation without distractions you need to sit him down and explain to him that a 2000k is not only a debt but it’s one of the most expensive ways to borrow money that there is apart from credit cards. Sorry to say it but there is a good chance he has some of those you don’t know about as well. You need to convince him that he does have a problem that is affecting the whole family and it must be resolved.

Don’t be tempted by these ads of the TV for debt consolidation loans. If you want debt advice speak to your local Citizen’s advice bureau, they may have debt counsellors there who can help you for nothing.

good luck

Sani Says:
August 15th, 2010 at 7:16 pm

Off course it is debt..still has to be paid for doesn’t it??

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