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There are many of us that might consider asking for a larger overdraft. This is something which could be useful but there are always problems that could occur as a result. It is wise to think hard about this decision so that you make sure that you are making one that is right for you.
Advantages
It is good to think about what you might gain form extending your overdraft. Of course, you would have access to more money, and this means that if you have an emergency and need money then there will be more there. If you max out your overdraft a lot, then it will mean that this will not be so likely as you will have more money available to you. If you often go overdrawn and then get an emergency, it will mean that there is more of a chance that you will have more money available to pay for any emergencies that come along. It can give you peace of mind to know that the extra money is there and that you will not be so likely to struggle to make ends meet as there will be money available to help you.
Disadvantages
Overdrafts cost money and for as long as you have money overdrawn you will be paying for it. Overdrafts tend to be charged at 35% – 40% interest which is pretty high compared to some other loans as well which means that you will also be paying quite a bit for the privilege of having this money. You may also find that because you have the opportunity of borrowing you will not budget so carefully because you know that it is there to fall back on. While it can give peace of mind to know it is available, you should still work hard to make sure that you only use it if you really have to. Some people will be better at this than others. Some may just be tempted to spend it because it is there and if you feel that you are likely to do this, then it could be a good idea to avoid getting the extension to the overdraft. If you are tempted to use it, then you could just find that you will get into debt frequently and then struggle to manage to pay it off and pay for everything you need the following month. It can be very easy to get into debt difficulties if you are not careful and keep a close eye on your spending. Therefore think about whether you are likely to budget and keep a close check on everything or whether you think that there is a chance that you will get into trouble and end up spending a lot more than you can afford or just buying more than you need and paying a lot of extra money due to the interest you are charged for doing so.
You will also find that if you keep going overdrawn it will show on you credit record. If you have access to more money then you will be likely to get overdrawn for more money and this will mean that it looks even worse because anyone looking will see that you are borrowing more and more. If you then want to get a mortgage or rent a home, you may find that this will put off those looking and you may find it difficult to find a good home or to borrow money in the future. It is therefore worth keeping this in mind as well when deciding whether to extend an overdraft.