Overdraft - what to do with it?

A_Star

We're slowly sorting out our debts and overcoming OH's belief that we're better to have it all in one place!

The thing we're left with is my student overdraft of £2k, the interest rate is huge but I have no idea what the best way is to deal with it.

I have £2k in savings and I know I'd be better off to use the saving to pay off the overdraft but we're wanting to extend our home in about a years time so I'm reluctant to use our only savings.

Can anyone offer me some advice?

GeorgeUK

How much are you paying in interest per month? If you use the savings to pay this off and maintain your current payments but put this into a savings account, how much will you have in 12 months?

If the interest you are getting on your savings is less that the interest charged on the overdraft, you are throwing money away.

A_Star

I'm paying around £8 a month on it. It is more than I'd be making on the savings but I'm unsure about having no money to fall back on if anything should happen.

Badger_Lady

Presumably, after your overdraft is paid off, it will still be there to use in emergencies..? I paid off my £2400 student overdraft last year, but I can use it again if ever I have to.

You've still got some more time to start saving again, and without the burden of debt interest... then if you need to borrow again for the house extension you can do so.

I wouldn't hold onto a debt "just in case"!

A_Star

Yes I guess that makes a lot of sense! Thanks!