EXPERTS NEEDED! Loan and OD - How to pay them off?

Danbob_3 · 27 September 2006 at 8:47AM

Hi, I have a current Barclays Bank account, my account has been credited with more than a thousand pounds a month for more than three years now, and Barclays have always bombarded me with offers and overdrafts. Last year me and my partner got into a bit of debt when buying our first home, namely I have a £850.00 Overdraft. I know this isn't a gigantic figure especially compared to some of the DFW's I have seen on here, but I want rid of it. I also took out a loan at the start of this month for £600 as they offered me 6.5% APR. I used that to pay for me and my girlfriend's first holiday, after nearly three years of being together, and we're going on friday. I'm going to post my SOA and was hoping somebody could advise me the best way to completely rid myself of the OD and the loan, I was hoping to pay off the loan in three or four big sized chunks, but I am unsure about early payment penalties, or settlement fees etc. Whats the quickest and best way to get rid of both of these debts?

Single male, no benefits WTC etc being claimed.

Earnings:

£1009/month

Payments:

£200 Rent
£30 Phone (O2 Genie PAYG)
£12 Toiletries (every month the same)
£50 food
£28 Barclay Loan
£16 Overdraft (It's at 1.97%)

Total in: 1009
Deductions: 336
Balance: 673

£673 a month which I have available to throw at these debts, if I say reasonably that £173 will go on leisure and things, realistically I have £500 a month to use. So I ask the experts: How do I do it quickest?

Emmzi · 27 September 2006 at 8:59AM

First you need the terms and conditions of the loan. look at your original agreement or phone them and ask if it's possible to make overpayments and if so, is there a charge.

An overdraft of 1.97 per month sounds more expensive than the loan, so I'd repay that first. Then spare cash to the loan, either every month if there's no penalty, or all in one go when you have enough saved.

Enjoy your holiday - somehow I think there'll be a month delay once the holiday treats are paid for!

xx

woohoo_postingid · 27 September 2006 at 9:03AM

Firstly, you need to find out the terms of the loan - if you will be penalised for early repayment etc. Even if there are early repayment penalties, the interest will probably be more than this anyway.

Your debts are £1450 and you think you can spend £500 per month on them. That's less than 3 months to being debt free - Not a bad situation to be in.

going2die_rich · 27 September 2006 at 9:05AM

By your calculations you could pay it off within 3 months (£1450 to pay and with £500 a month spare cash a month), so surely you don't need anyone to break it down for you. Read the terms and conditions to see whether their are any early repayment charges and if so way up the charges compared to the interest you'd have to pay if you were waiting for the early repayment date to be over with.

If the early repayment charge does outweigh the interest then put the money you'd have used to pay it off with into a savings account so that it's making you a bit extra while you wait for the early repayment charge date to pass. If you'd have to wait 12 months then a Regular saver is probably best. Look into A&L's 12% Reg Saver if this applies but it really takes 14 months not 12, as it'll take a month and a bit before it's set up and ready.

I notice you haven't included any other bills in your outgoings, Gas& Elec, Water, BT Landline, Tv License? Be aware of these as some people forget about them especially if they are paid quartley so don't get caught out by not remembering these.

Hope this helps,

Danbob_3 · 27 September 2006 at 9:30AM

Thanks guys it's pretty clear I need to have a good read of my agreemant tonight. I think I should have explained I rent a room, I'm a regular churchgoer and my clergyman owns a property, theres 4 lads in it so everything is inclusive, we have freeview and all use our own mobiles so what I posted is correct, I appreciate what a good situation I'm in and the reason I posted was so that it stayed that way. Thanks for the advice team

CLAPTON · 27 September 2006 at 10:12AM

confused....you got into debt because you bought a property with your partner but you dont pay any mortgage but live with 4 lads?

Danbob_3 · 27 September 2006 at 10:38AM

Hi Clapton I didn't want to go into my life story for the sake of my post but to explain, early last year me and my girlfriend got a mortgage together, we had the opportunity to buy a 100k + house for 80k, from one of her relatives. We did, but after about 6 months we decided living together wasn't for us, and decided to move apart but stay together. We sold the house but because of all the fees and such like I ended up with a little bit of an overdraft while it got sold, because we both needed deposits/rent etc on seperate rented properties. As a result we are stronger as a couple and we effectively didn't pay any rent for that 6 month period, I just have an overdraft hangover. It's never been a major problem but I'm starting to think that now I also have a small loan, if I don't get rid of it then it will start me on a slippery slope to more debt. I'd like to be at 00.00 balance so with the £500 available a month I'd like to do it as quickly and efficiently as possible, I was just asking advice on whether to pay them both off at the same time or one then the other.

Hope this makes it a little clearer for ya

CLAPTON · 27 September 2006 at 10:42AM

if the overdraft is at 1.97% per month (approx 26% APR) then its a no brainer to pay this off first.

tyllwyd · 27 September 2006 at 10:54AM

Other people have already mentioned that you are going to have to look at the terms and conditions of your loan to find out about early payment penalties etc. There is quite a useful calculator here (http://www.fsa.gov.uk/consumer/04_CREDIT_DEBT/loan_calculator.html) to show you how much interest you will be paying over the term of your loan.

To be honest, it seems a pity to have taken out a loan for such a small amount when your finances are usually healthy - if the terms and conditions penalise you for repaying early, it might turn out that a credit card with 0% on purchases for six months or so would have been a cheaper option for you.

going2die_rich · 27 September 2006 at 11:23AM

So what happened to the £20k profit from the house sale?

EXPERTS NEEDED! Loan and OD - How to pay them off?

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