Best way to pay off overdraft debts?

foreversomeday

Hello,

My OH and I are trying to sort out our debts. We have loans which I think will cost more to get out of early than to just stay with the repayments, but the debt which is causing us a problem is the overdraft over 3 bank accounts.

The overdrafts total £2,900 and we are trying to find a way of reducing the interest payments on them. £2,500 is in my partner's name and £400 is in mine. I hardly have a credit rating because the overdraft is the only credit I have ever had but OH's credit rating is quite good (they are always offering him more money anyway, they know he is far too easy a target! :rotfl:) - for this reason we decided not to get a joint account.

Our idea was to get a 0% balance transfer card and pay it off using this, but reading the article I got the impression it was only about balance transfers from other cards, which doesn't apply to us. This made me worry that I don't understand enough about credit cards to be able to use them to our advantage, as I don't want to get into more debt.

A friend told us about the Alliance & Leicester account with 0% interest on overdraft for 12 months but I think you have to be 21 for this - I am 20 but OH is 25, so we could at least pay off his overdraft with this one. However I am concerned that it will probably take us more than 12 months to pay off and I don't know of any other accounts like this so I'm not sure whether that is the best thing to do either.

I don't know how much realistically we can afford to pay back a month with a baby on the way as I don't know how much our bills are going to change by (we are losing a lodger who uses a lot of water, gas and electricity but he does contribute towards the bills. Obviously with the baby we will have increased water etc usage to if there was just the 2 of us but I don't know what kind of change to expect.) I can post an S.O.A. at some point but OH is being impulsive (how we got into this mess! ) and wants something to be sorted tonight (though I am aiming for the end of the week) and I am so tired! So at least could do with a few options to think over when I have had some sleep as I have managed to persuade him it's better to spend a little bit of time looking around rather than jumping in and just getting the first one we see.

So any ideas this way please I will be forever grateful!

simpywimpy

The interest rate on your overdraft is likely to be high. I would use a 0% credit card to pay this off personally. If it comes to the end of the 0% period and you haven't managed to clear it, then you could apply for a different card and transfer again.

As long as you just move the debt and don't add to it, you should be okay.

foreversomeday

simpywimpy wrote: »

The interest rate on your overdraft is likely to be high. I would use a 0% credit card to pay this off personally. If it comes to the end of the 0% period and you haven't managed to clear it, then you could apply for a different card and transfer again.

As long as you just move the debt and don't add to it, you should be okay.

So can you use a 0% balance transfer card to transfer debt from an overdraft to the card? The balance transfer cards article only mentioned balance transfers from other credit cards. This was where the confusion came from

savingholmes

foreversomeday wrote: »

So can you use a 0% balance transfer card to transfer debt from an overdraft to the card? The balance transfer cards article only mentioned balance transfers from other credit cards. This was where the confusion came from

If you get a card through a cash back site like quidco - you may get paid say £30 just for taking out the card. Then if they accept overdrafts then you can transfer money to it... personally I haven't done this.

The other way to do it is to get a 0% purchase card and use it for all the things you normally use your bank account for until your overdraft is wiped out and you have effectively transferred the debt. This also saves on balance transfer fees;) That tends to be my approach

chevalier

First of all ask your bank to reduce your overdraft by say £5 a month that way it will be decreasing anyway. Secondly there are some credit cards that you can do what are known as super balance transfers where you CAN pay off overdrafts with them. I think virgin is one. BUT you have to be very disciplined and NOT SPEND on the new card, as this defeats the object.

Best of luck with sorting this out. And don't worry too much about the baby. If you are not proud then they will not cost too much, ie lots of people will offer clothes etc it you let them know that you will take them. Likewise, crib baby bath etc. www.freecycle.org is a great site for finding big baby items. The things that are offered are free, you just have to go and pick them up.

If you are on a low income then you will get the £500 surestart grant too. One tip I found was to keep an eye on the baby section between now and when the baby is born. Whenever there is an offer on stock up! This spreads the load on you. And of course breast feeding is the biggest money saver (and better for you and your baby) of all.

best of luck
chev

tealady

Hi and congrats on the baby by the way. If you pop up your SOA hopefully peeps can spot where savings can be made. Also have a looksee at cashback websites to see if you can open a new bank account. If you can then either ask if you can transfer your overdraft or try for a 0% card to put it on then cut up the card.

foreversomeday

Hi all,

Thanks for the replies.

The problem is (I forgot to explain this in the first post!) that we extended the overdrafts to their maximum so that we could buy a car which will in the long run be cheaper to run, safer, and easier as the old one was 3 door and this one is 5 door. That will be the very last big purchase for a long time and OH is considering selling his PS3 to cover the cost of it - but it needed to be done and we got a good deal, so I am happy we didn't spend unwisely.

I don't think getting a 0% purchase card will work as our biggest expenses are bills which are all paid via direct debit, just using the card to do the normal spending on I don't see working - also I really wanted something I can cut up or lock away in a cupboard and not be tempted to spend on at all. I understand about balance transfer fees but a one off fee has got to be better than paying out the interest and (sometimes) charges every month.

I could probably talk to the bank and get them to reduce the overdraft slowly but to be honest I don't hold out much hope as they seem to be concentrating all their efforts on getting us more into debt, not out of it. Also I find it very difficult to explain how the system works to my OH because he has very skewed logic. He doesn't seem to mind how much debt he is in (which is why this is a struggle as he doesn't see the debt we have at the moment as problematic whereas it worries me.) as long as he isn't on the limit. Whereas I would rather have £0 available in my bank account with no overdraft facility, and make do on what little we did have until more money came in.

Thanks for the advice on the baby things People keep being surprised when I tell them how little we have for baby, but I don't see that you need everything people see as "essential". For example we're not using a moses basket or baby bath, when we have a perfectly good cot and sink! And most other things we have managed to get second hand or been given by friends etc. My only weakness is little clothes but I have been disciplined and got them in larger sizes for him to grow into rather than buying everything in newborn. I am definitely breastfeeding as well, I am determined! The problem is we are struggling to pay the bills and the debts, I don't see the baby costing us that much more than we are spending out at the moment when we factor in the loss of income from the lodger. I haven't been working much since March anyway (long story!) so in fact we will be slightly better off when I get my MA through as at least it will be a regular, reliable income. We are eligible for the Sure Start Grant as well but can't apply for it until the baby is born.

I think I will try to do an SOA before the end of today, is it best to post here or in a new thread?