£8500 - do I pay off my loan or overdraft?

itsrainingmen_2

Hope I have posted this in the right area!

I will be coming into £8500. I have a £6000 overdraft which I would like to clear as I am starting to go over it each month. I also have a loan with a current balance of £6641.17 at £272.89 per month which I took out in June 06 and it has another 2 years to run. So what do I do, which do I pay off? Advice gratefully received.

Thanks

kerry13238

which ever is the highest interest

ukbill69

Im thinking the same, I thought be better to pay off loans/credit cards first then all payments stop and only 1 payment then, then use other money e.g. wages left to pay back the overdraft.

chuckley

defo loan as it will make overdraft easier.

LeeSouthEast

Depends which has the higher APR.

That said, I'd personally pay off the overdraft first. That can be recalled at any time for any reason with only 30 days notice. The loan is a set schedule and may incur early repayment fees for paying it off early.

Hippychick

It could also be worth you opening another current account without an overdraft. Have all your wages, general bills etc to go from new account then pay a set amount off the overdraft each month. It's the only other way to clear your od sensibly.

Pay off whichever has the highest interest charged.

CLAPTON

first thing ot do is to look at your spending and ask why you are spending more than your income. Otherwise once you have used your 8k windfall you will simply build up the debts again.

Presumably thios 'get out of jail card' will only happen once.
try http://www.makesenseofcards.com/soacalc.html
which is an excellent budget planner
Post up the result if you like.

In money terms paying back the debt with the highest APR is usually best.
However as ODs are recallable will little notice I would pay down the OD... don't be surprised it's cancelled once you reduce it to zero. ... All the more reason to start budgeting now.

itsrainingmen_2

Thanks to you all for your replies.

This windfall will only come once and how I use it will be part of a finances total review as my husband and I are fortunate enough to have good salaries coming in each month so we need to see what is tipping us over into debt! (apart from spending too much that is!) I will check on any penalty payments on the loan and see where else we can cut down before deciding what to use it for.

Thanks all.

claire0788

Personally I would pay the overdraft off first and use the remaining 2500 to put to the loan if you can make lump sum payments to the loan that is.

When i had my overdraft of 3000 and up to the limit every month I was at about 55 a month on interest. So for 6000 overdraft just for talking sake is 110 interest a month 1320 over a year !

OMAR

i would pay off the loan and then put ur overdraft on a reducing limit with the bank

elfen

I'd pay off the overdraft, then use the remainder to make a lump sum payment on the loan. You could see if this affects the monthly repayments, which may either drop in number remaining or drop in DD cost (ie how much each payment is for)