Change banks DIY debt solution
Summary: This paper examines the implications of switching / change banks and opening a new account
Changing banks - a financial necessity?
Our own bank has a certain amount of authority to take money from our account. The most obvious way is through a loan that they take automatically from our account, usually soon after we have been paid. Furthermore they have a right of transference which means they can take credit card payments from our account. Then of course there is the overdraft which we may be constantly living in, the limit of which can be reduced anytime by the bank.
Banks - a practical necessity
Banks have massive overheads and provide an essential service, and many of us enjoy "free banking" and a range of services. They have to make money somewhere. And it's not unreasonable of them to want repayments for money that we were very happy to borrow, with agreements we were very willing to sign. We can't blame them for wanting us to honour those agreements. Freezing interest and accepting reduced payments can create dangerous precedents.
When debt repayments are too high
However there comes a point for some of us, when our bank has so much control over our finances we cannot afford to meet other priority payments. The consolidation loan through our bank seemed a great idea at the time, but the massive monthly payment taken out as soon as we're paid, almost immediately creates an overdraft situation. The overdraft grows over the months until we hit the limit. Then mortgage or rent or council tax payments are missed and our overall situation is spiralling out of control. At some point we need to address the issue with decisive action.
The listening bank
First step is to talk to our bank. They can't help if they don't know. It may be possible to restructure the loan or consolidate certain debts to reduce monthly payments. But there may come a point where the only way we can protect our income for priority payments, is to have it put into an account where only we have control of it. To be sure the debt to our old bank won't go away, but at least we can now view our overall situation and prioritise payments. We may need professional help in looking at ways of dealing with the debt that is now not being paid contractually.