investing interest free overdraft

Former Member

ok, you'll have to bear with me as I honestly don't have a clue about finance...

I came up with this idea - basically I wanna know if it would work

I'm starting university in September (for the second time after a bad start last year). It occurred to me that many student bank accounts offer totally interest-free overdrafts for the time that you are studying. I consider myself to be quite good with money (having never gone overdrawn before) and I thought perhaps I could put this overdraft that I am being offered to good use - would it be easy enough to take out the entire overdraft (probably about £1,500) and place it in a high interest savings account for the duration of my 3-year course? Obviously if I got into financial difficulties I could then withdraw the funds again

:chin: It's probably a lot more complicated than this or people would have done it before. But from what I can see, it's money for free

Anyone got some tips?

cheers

Former Member

Sounds like a good idea, to be honest - as long as you can afford it and you won't dip into the money you've taken out then it's pretty safe.

Former Member

some people do that, and they also pay their SLC loan into a high-interest account too. there isn't really anything wrong about it, but the bank can refuse to allow you to take all the money out in one go, and the bank may do if you look like you're ripping them off. the overdraft is a privilege of the account, not a right, and the bank may refuse to lend you the money.

Former Member

Yeah it's a good idea, get it done.

Get into a good regular savings account IFWU (A&L are good @ 12%)

Former Member

Yea I did that. Won't make millions but you could get maybe £500 at the end of your course if you max out an ISA.

Former Member

Regular savers accounts at 7%+ are better than all the Cash ISA's currently available.

Former Member

Yup, works quite well.

Former Member

I did this, kept the current acount fairly overdrawn but kept "savings" in an ingdirect account. Lots of students do this.

Former Member

Hey there,

Great to see you guys thinking outside the box in terms of your finances; we all need to do this to secure our financial positions.

In principle there is nothing wrong with investing your student overdraft into a savings account. But be aware of the consequences. Overdrafts by their nature are not meant for long term borrowing and they are only a short term fix. So as you said yourself you should have the funds readily available as your bank can ask you to pay the overdraft limit back.

Also, remember that the overdraft is only free when you are a student, so ensure that you deposit it back into the account to avoid charges upon graduation.

Hope this helps and good luck with your studies.

Former Member

I saved my student loan which was really useful - i then used to to pay for an MSc after i had graduated which meant i was paying back that on the SLC terms rather than graduate loan terms.

Also check which bank you take out your student bank accoutn with as mine offered a continued interest free overdraft for a year after graduation which was great - then the interest free part went down year on year but I still have the £1,500 left.

Former Member

L1ttleOne wrote: »

Hey there,

Great to see you guys thinking outside the box in terms of your finances; we all need to do this to secure our financial positions.

In principle there is nothing wrong with investing your student overdraft into a savings account. But be aware of the consequences. Overdrafts by their nature are not meant for long term borrowing and they are only a short term fix. So as you said yourself you should have the funds readily available as your bank can ask you to pay the overdraft limit back.

Also, remember that the overdraft is only free when you are a student, so ensure that you deposit it back into the account to avoid charges upon graduation.

Hope this helps and good luck with your studies.

Necroposting moderators :hyper:

Former Member

L1ttleOne wrote: »

Hey there,

Great to see you guys thinking outside the box in terms of your finances; we all need to do this to secure our financial positions.

In principle there is nothing wrong with investing your student overdraft into a savings account. But be aware of the consequences. Overdrafts by their nature are not meant for long term borrowing and they are only a short term fix. So as you said yourself you should have the funds readily available as your bank can ask you to pay the overdraft limit back.

Also, remember that the overdraft is only free when you are a student, so ensure that you deposit it back into the account to avoid charges upon graduation.

Hope this helps and good luck with your studies.

Not strictly true, as many student accounts change to Graduate accounts, so the opposite of a student account happens.

Basically with student accounts, the amount offered generally increases over the 3 years, e.g. £1000 in first year, £1500 second, £2000 3rd and then when you graduate, it goes the other way, £2k, down to £1.5k, down to £1k to help you repay it.

I think it's a good idea to do what you're suggesting, if you can find an account paying high enough interest. The way things are at the moment with interest rates, you may struggle finding a good savings account that doesn't impose harsh penalties if you don't pay in etc.

RE the comment about the bank not letting you take the money? - They have offered the overdraft, so you CAN take all the money out if you want. Just be prepared to pay it back in if the bank ask.

Might even be worth applying for the account via Quidco, as Legal and General are offering £50 for opening a new account:

http://www.quidco.com/insurance-finance/finance/savings/legal-general-investments/