Interest Free Overdraft or Savings??

wangtastic

Hi there,
I shall try and condense this as best as I can but apologies if it is a tad long!

I left university last June with debt of £700 on my interest free student overdraft.

I couldn't find a job at all until October and in that time I claimed job seekers. Unfortunately my car broke down and I was forced to spend £300 on repairs, I did this using my limited savings and some more on the overdraft.

I am now in a position of earning £800 a month (not much but it's a start) and I am wondering what to do:

Start saving my money and slowly pay back the Overdraft
or
Pay off the overdraft

Currently I have £834 on the Student overdraft which is interest free up until £1000, but I believe this will stop at some point now that I have graduated? or at least decrease every year? (the account is with NatWest)

I have no savings and if any major bills came along I'd be jolly roger'd!

If I choose to pay off my overdraft it would essentially take 2 payments to clear as I'd need to spend money to survive the month.

Any ideas as to what I should do?

pinkarsenalprincess

I would clear the overdraft.

WillF_2

pinkarsenalprincess wrote: »

I would clear the overdraft.

Well technically it would make more sense to save as OP will make more money this way, while remembering to clear the overdraft when it ceases to be interest free.

This is a money saving web site after all!

danothy

WillF wrote: »

Well technically it would make more sense to save as OP will make more money this way, while remembering to clear the overdraft when it ceases to be interest free.

This is a money saving web site after all!

From memory Natwest give you a year after you graduate then step down your overdraft, I'm not sure what the levels are though. From now until the when they ask for the first repayment the interest earned would be fairly minimal even in the post office online saving account.

Personally (considering the minimal benefit to saving then paying it off when the 0% runs out) I would pay it off sooner as you can dip back into it if an emergency crops up and it removes the temptation to use your savings for something else. If it'll only take you two months then you'll be able to start saving for yourself again fairly promptly anyway.

The bigger the debt the more it pays to offset the payment with 0% periods, but this is small enough to just be a monkey on your back if the worst were to happen and you end up unemployed again.

savingcaz

I'd save as much as you can, and then when the overdraft no longer is interest free pay it off in one go! That way the little interest you earn on your savings is in your pocket isn't it

wangtastic

cheers guys, I've decide to spend £100 on the overdraft this month, and £300 in savings (then £400 for rent and bills) then next month do the opposite and the following 2 months £200 on the overdraft and £200 in savings. then £400 in savings there-on-after

Soph86_2

I think Natwest switch you to a graduate account and then decrease your overdraft by £200 a year.