Interest rates question

MoneyWaster2007

Hi, i rang up halifax today to find out the interest rate on my personal loan. they told me it was 11.5%. i then wanted to find out the interest rate on my overdraft, so i looked at a letter which says it is 1.50% per month (19.5% EAR). so i then thought, woah hold on a minute, i need to be focusing all of my spare cash into repaying my overdraft before i focus on my loan, even though the loan is a larger amount, because the overdraft is costing me more to have than the loan, and therefore needs to be prioritised.
am i right in thinking this?

natsplatnat

Hi!!! I am doing the same.... continuing to make the necessary payments on my loan and CC and clawing my OD back to £0. My aim is to then run my current account to £0 but not below and use all the spare cash to over pay my loan and then my CC!

Go for it!

MoneyWaster2007

i dont understand it properly though.
surely it would be logical to tackle the larger debt first? as opposed to the debt with the highest APR?...

RAS

You need to apy the most expensive debt off first. Play with the snowball on www.whatsthecost.com and you will see what we mean.

MoneyWaster2007

the thing is, my loan is costing me 66 quid per month and the overdraft is costing me 9 quid per month. so where is the logic in paying the overdraft off first? even if it is a higher APR

RAS

Go on the snowball, put in both sets of figures and you will see why.

Jacks_xxx

:hello: Hi honey,

The best way to see the logic is to play with The Snowball (link in RAS's post)

Punch in all your debt details and tell it you want to pay in balance order first then scroll down and read the part where it tells you how long it will take you and how much it will cost you then open another window and do it again but this time tick the box that says interest order.

That should bring it home to you hon!

Love Jacks xxx

RAS

Nice to see you around jacks

MoneyWaster2007

RAS i have checked the snowball calculator, but i still dont understand...

it is saying the wrong amounts of interest charged per month for my loan, as it isnt taking into account that i have been overpaying on it. and the interest charged per month is worked out on the basis that i hadnt paid off any extra, so is higher than shown on the snowball calculator.

i still think i would save money by paying the loan off first, but everyone i ask tells me otherwise??

i must be thick, because its got me real confused...

RAS

Post up the figures so people can do it for you

Loan value today, minimum repayment, how many left, Apr. OD, APR.

MoneyWaster2007

Loan outstanding balance : £3,753.46
Overdraft : £700.00

Monthly repayment on loan : £174.20

it is impossible to work out how many payments i have left because the interest added each month is going down by roughly £1 per month.

Loan APR : 11.5%
Overdraft EAR : 19.5% (1.50% monthly)

Current interest charged per month on loan : £66

Overdraft interest charged per month : £9.00 (on average)