Over the last few years overdrafts have become very much a normal way of life for many people in the UK, something to fall back on in times of need, but should they really be a part of every day financial planning?

As competition hots up in the financial industry it has never been easier to get an overdraft, banks are literally giving them away as soon as you open an account. While many people are often attracted by the small “buffer” zone which is interest free, they tend to forget that the interest rate on overdrafts (not to mention the monthly fees which many banks charge for the service) can be fairly high.

Other aspects to consider about an overdraft include :-

· The majority of people who have an overdraft will use it at some stage EVERY month.

· Check your monthly overdraft charges each month - interest and monthly fee - and you will be surprised how high it actually is.

· If you are constantly into your overdraft each month, that may restrict your opportunity to move elsewhere, and take advantage of other offers in the sector.

· Overdrafts are repayable on demand - as soon as you hit any kind of financial trouble, watch the banks withdraw the service. For some this can be the beginning of serious financial troubles, with a major knock on effect.

Unfortunately for many, the chance to spend their overdraft can often be too tempting and can lead to further over spending.  This can then lead to extended overdrafts which they have little opportunity to actually repay, and possibly new loans, etc.

Surprising as it may sound, for those who make constant use of their overdraft facility, a loan may often be a more sensible option.  A loan offers a more structured repayment plan, a small amount each month going to pay off the debt, and very often the interest rate will be less than the cost of an overdraft.

To make the most out of any borrowing facility, it is essential that you have a structured repayment plan.