What is the difference between an overdraft and debt?

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.

Answer

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. You should look at speaking to a debt advisor

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