What would you do?

smallfry1983

I started a diary last night, and having looked into the interest rate on the overdraft, have realised it may be cheaper to get a loan over 2 years at 12%/13% (best I've found is 8% but not sure we'd qualify) to pay off the £3000 overdraft at 19.5%.

I really can't decide which is the best option. In theory we can pay off the overdraft quicker than 2 years (we think possibly just over a year if we are very strict, but this gives us NO le-way each month).

Can anyone offer advice? As a general rule I hate getting a loan to pay off a debt...

If we did this, it would also allow us to make more than the minimum payments on the credit cards each month. The 0% on those end towards the end of next year.

biggaz26

I think your best bet is to move the debt where it is cheapest. Provided you dont run the overdraft or cc back up after.

It would also depend on how good/bad your credit rating is but im sure you can get a better rate on a personal loan than you are paying on your OD. Maybe it would be worth switching to a basic bank account to prevent being overdrawn in the future.

Hope that helps

Gary

biggaz26

also should have said...

If you have a good enough credit rating concider switching you CC to a 0 or low % balance transfer deal....not sure if there are many around now but even if they change a fee and you can pay back more than the minimum required repayments you may be able to clear it with out accruing to much more interest.

smallfry1983

All the CC are 0%... did you mean OD? We have the only 2 available to us at the moment, so that wouldn't work. Our credit rating is good, however we only got the credit cards a couple of months ago, so not sure if we'd be offered more credit right now. I'm going to get a copy of my husbands credit report later (all debts are in his name, and since I am declared bankrupt, not sure how this would affect him now we are married)

My gut instinct is to get a loan and pay back more on the CC. Will just need to see if my husband agrees!

We don't use the credit cards for buying anything because then we'd be stuck paying interest until the balance is paid off, and we are both at the stage now where we are getting so fed up with constantly being in debt that we would have an overdraft of maybe £100 for emergencies or months where we get hit with unexpected expense, but nowhere near what we have now.

Tixy

You could try moving the overfraft to a 0% credit card (you will need one of the super transfer cards to move the money to your current account - as per this list - http://www.stoozing.com/sbt.php )

Whilst a loan is a cheaper rate than the overdraft it will probably not allow overpayments.

If you go for a 0% card make sure you cut up the card when you receive it and you would need to make sure you are discliplined with repaying the card.

smallfry1983

We already have the 0% interest cards we can get (we've just transferred balances from 3 cards so not able to get those again), so thats not an option.

I spoke to DH about it and after going through some numbers, we both agreed a loan is the best way forward for us. It would allow us to pay off one credit card before the 0% interest on it ended.

We are very good with not spending on cards now (think last thing we bought on the cards was a year ago!), like I said he only has access to one card with his monthly allowance on it, and I know exactly where a little bit here and there gets you, so it's not even a temptation for us to spend on it.

GeorgeUK

If you do decide to get a loan, check if you can make overpayments to the loan and also look out for the PPI. It's not necessarily a bad thing but you could cover yourself cheaper by getting a seperate PPI product. I don't have any PPI as i think my job is fairly secure and it does cost quite a bit extra.

Have you tried reclaiming any bank charges etc?

smallfry1983

I am in the process of trying to reclaim charges, I'm sure they'd all add up to a pretty penny!

We don't get PPI with loans or anything like that, but we do have PPI with another company to cover payments to loans and credit cards. DHs job is secure enough, but I like to cover my backside!

I don't think the loan we looked at allowed overpayments, but will double check!