Pay off CC debt with overdraft or not?

lacoste1985_2

Hi all

Since last posting on here almost a year ago, my circumstances changed in June this year when my car broke down (head gasket went again so wasnt worth repairing it) which made me decide to part with £8k towards a 11 plate car. Before this happened I had just about reached a point where I was debt free and had finished paying off all my credit cards.

As I didnt have 8k to pay for the car straight off, I decided to put £5000 spread across 3 credit cards (the other £3500 was lent to me by my parents so I could pay some of it off immediately). 2 of the credit cards are interest free, 1 until Dec 2012 and 1 until Nov 2013. The other card has around £2k on it which I am trying to get rid of first to avoid incurring interest on it. The interest isnt particularly high, the rate is around 1.31% but I would still like to clear it before getting rid of the other 2 to enable me to pay my parents back last.

I have an overdraft of £1000 which I am currently well into. Every month when I get paid, instead of trying to get out my OD I am using every penny possible to put towards the card with the 1.31% interest to try and clear it off. In the meantime I am still being charged £5 OD usage fee every month and OD interest.

What I would like to know is whether this is the best way of going about addressing the debt or whether I should be getting out of my OD first and then using whatever money I have spare towards the CC's?

I have estimated it is going to take me about 10 months to clear off all cards and pay my parents back before I can resume my goal of trying to save for a flat deposit.

Any other advice would also be appreciated.

Many thanks

Sam

R_P_W

You won't want to hear this but sounds like you have seriously overextended your self in borrowing to buy the car.

In principle you should focus on repaying which ever debt is costing you the most in interest each month. You do need to really take a hard look at your outgoings and cut back where you can, as your post suggests some over spending (either present or previous on cards or overdraft).

I wouldn't pay off the credit card personally with the overdraft, as the bank can withdraw your OD facility and demand immediate payment - although others on here may have a different view?

Best way to help your situation is to maybe sell the car and buy a much cheaper one - using the difference to pay back what you can on the cards. Your 0% starts to expire in 3-4 months and no guarantee you will be able to get another one