Struggling to work out what to pay off first

Lorne

Hi there, would appreciate some advice, I have 3 debts (2 overdrafts and a loan) at exactly the same apr

overdraft 1 of £2500 - no repayments made
overdraft 2 of £2500 - no repayments made
Loan of £7544 - £217.62 per month

I have £6200 to pay towards my debts, I can make overpayments to my loan (minimum of £500 each overpayment)

I go between deciding to chuck money at the loan so that I can repay that off quicker and have more 'spare money for debts' a month and repaying the overdrafts to get down to one debt and making more regular overpayments to the loan.

Any advice would be greatly appreciated, I'm stuck and therefore haven't paid off anything!

Thanks

Hannah_10

How much money have you got free for making debt repayments and how much is your minimum loan repayment?

LittleMoog

Hiya,
In your shoes I think I'd pay off (and cancel!) both overdrafts, put the remaining 1200 to the loan and then start saving the the 140 you currently pay in interest in the overdrafts to make extra repayments on the loan whenever you get to 500.
Hope that helps

Lorne

Hannah_10 wrote: »

How much money have you got free for making debt repayments and how much is your minimum loan repayment?

For repayments after allocating the £6200 is £500 per month and minimum loan payment is £217.62.

DarkConvict

Clear the overdrafts, reason is simple. Overdrafts can be cancelled given 30 days notice and if you cant repay them the charges will be excessive, and very likely land you with a CCJ. Atleast with a loan you have set payments which you are been able to keep making.

Hannah_10

I'd use the first £5,000 of the £6,200 to wipe out the overdrafts and close whichever of the accounts because bank charges are a risk otherwise. Also overdrafts are easier to ignore than a loan with a regular repayment.

You then have £1200 to reduce the loan in one go and the £500 p/m to overpay the repayments with.

Lorne

Thanks for all the advice, can completely see the logic of paying off the overdrafts, they are more likely to get me into trouble in the long run. I was just not able to see the best path forward, thanks all who responded, it is very much appreciated.