How a Student Overdraft Led to a Decade of Debt

Today we have a guest post from the amazing Phil who runs MoneylessMan which is a blog all how he is getting himself out of £35,000 worth of debt!!!

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Can a student overdraft lead to a decade, or even a lifetime of debt? Who knows, but it certainly didn’t help in my case.  To understand why, we need to travel back to 2010, and to the beginning of my life of debt.

I was almost 23 years old when I decided that I wanted to go to university.  Up until this point, I’d never applied for any form of loan or credit card, and lived month to month on wages from my job, and within a bill-free environment thanks to my generous parents.

When I was accepted on to my university course, I started to look around for a place to live. One of the main worries I had was about money.  I would receive a student loan, but I’d be leaving my job and the wages it gave me to move away to study.  I started thinking about getting my hands on some form of safety net to make sure I’d be okay if something happened where I’d need money quickly.  What I didn’t realise is that I’d soon become tangled up in my own net, struggling to free myself for years to come.

Smug that I’d got my finances in order, I moved away with a brand new, sparking £1,000 student debt.  I was so impressed with myself.  It was a 0% overdraft, meaning I didn’t need to pay any interest on the balance for the next 4 years! Brilliant, right? Possibly.  But not for me.  What happened next was 4 years of reckless use of the overdraft.  It wasn’t costing me anything so it was just free money in my eyes.  I used it over and over, and that’s fine if you can pay it, but my safety net had now disappeared.

I found myself at the bottom of a £1,000 overdraft, and it didn’t feel good at all.  Where had all the money for emergencies gone? In truth, it had been spent on things like pizza.  Delicious? Sure! Worth it? No chance! And so it began.  The next thing I knew, I’d extended my overdraft.  At first, I added £500 to it.  No problem.  And then I extended it again. And again.  And a few more times.

My 0% £1,000 overdraft now stands at £5,000, and it’s no longer 0%.  In fact, it now costs me £80 per month to be in it.  And I AM in it.  I’m all the way at the bottom of it, and I’ve never managed to climb out.

It gets worse.

As I was repeatedly extending my overdraft, I developed an unhealthy relationship with debt.  I started to see it as a way out of problems.  In reality, it was debt that was actually causing my problems.

Over the following couple of years, my debt grew substantially.  It now stands at a total of £35,000.  This does NOT include my student debt, either.

I’ve taken out several £5,000 loans, and a fair few credit cards at unpleasant rates.  The minimum payments on my debt each month now equals the entirety of ALL my other living expenses.  That includes rent, bills, food, and entertainment.  I found short term relief in debt, when I should have faced up to the issue and started to get some control over my finances.

I want to make it clear here that I’m not bashing student overdrafts (or other overdrafts for that matter).  I am sure they can be very useful if you use them sensibly.  I think it’s important to highlight how things can get out of control though.

People talk about gateway drugs.  “Don’t try that, it will lead to something much more dangerous!”.  In a sense, a 0% student overdraft was my gateway debt into the realm of high interest credit cards and loans.  And it’s tough to quit! Even now, having started on my debt clearance issue, there’s a niggling feeling that I would like a safety net.  But I know too well where that leads.

The overall message I’d like to convey from this post is to be careful with credit.  It can soon get out of hand if you’re spending money before you’ve earned it.  Eventually, there’s nowhere to go.  I can no longer apply for loans or credit cards.  The companies simply don’t want to know.

I dread to think what the next step would be had I not decided to finally sort this mess out.  Payday loans? Loan sharks? It’s not very nice to think about.

On a very positive note, I will NOT be applying for any more loans or credit cards.  In fact, I’ve made it my primary mission to clear my debt as quickly as possible.  By making huge savings in places I never even thought to look, and finding ways to earn extra cash from a variety of sources, I’ll be taking HUGE steps each month towards financial freedom.

To keep myself accountable, I started a blog to document the entire process. I’d love to hear from you.  Interaction from others makes this a much less lonely journey!

I also want to spread awareness about the dangers of debt, and how small amounts of credit can lead to life changing problems.  It is my hope that people in a similar situation will find my blog, and will be able to follow the steps I took in order to clear their own debts.