There are some people that have more than one overdraft. This is because they have more than one current account which have overdraft facilities and then they can borrow on both. There are pros and cons to doing this and it is well worth thinking through them all before you take out a second overdraft.
Advantages of Having Several Overdrafts
If you have more than one overdraft then you will have access to more borrowing. This means that if you need some money, then you will have two places that you can get it form. If you have already used some of your overdraft, you are more likely to have some left to use for other things. You will also have more money to fall back on in an emergency and even if you do not use it, it could give you peace of mind knowing that it is there. Once you have an overdraft facility set up, you will be able to use it whenever you need to and that means that you have very quick access to money. With an overdraft you can withdraw cash or transfer the money, use a cheque or it can cover a direct debit or standing order which means it is a very flexible loan to have access too. You will not have to wait for the money, unlike other types of loans which need to be arranged first, this can be arranged well in advance or may even just be there when you open your current account. Then the money will be there when you need it or you may never use it at all. It can be good to know that it is there. However, having more than one may be more useful for some people than others.
Disadvantages of Having Several Overdrafts
Although having access to more money could seem like a good idea there are possible drawbacks as well. Firstly, overdrafts are expensive. The interest rate on an overdraft tends to be between 35% and 40% and this means that you will pay out quite a bit for the privilege of borrowing the money. There are cheaper ways to borrow, for example a credit card is likely to be cheaper and a personal loan will be as well. Therefore, although it is convenient and there for you to fall back on, it could be wise to just keep it for emergencies.
There will be some people that will see the overdraft as their money that they can spend to treat themselves to things. This means that as soon as they get the money offered to them, they will start to spend it. This means that they will immediately be paying interest but they might not think about that and just be focussed on the items that they can buy with the money. This could leave them in trouble later as they could end up struggling to pay the interest or repay the overdraft. If they spend the overdraft, then if they do need money in an emergency, it will not be there for them to use. Therefore, it is really important to consider this.
Some people also have tow current accounts with overdraft facilities and have spent the money but only have payments going in to one of them. Payments going into your current account, such as salary and benefits, will automatically repay the overdraft. This means that the other overdraft is not being repaid as no money is being paid into the account, it will just be accumulating interest all of the time. It can even be easy to forget that it even exists. So, it can be a risk having two because you might just forget one and it is easy to not repay it.