What to pay off first?

Ladyluck1

Hi,
We've just received our deposit back from a previous rental property £650 and I would like to pay off some debt with it.
But... I'm not sure which is best to pay first?

Here's my personal debt (not including dhs free overdraft)
Overdraft - £700 I pay £30 a month to use
Credit card - £1100 I pay £46 a month and I believe it's 19% apt
I have Next debt but the interest has been frozen.
Any advice appreciated.

sourcrates

Hi,
Well £650 would almost wipe out your overdraught, and save you £30 a month, or you could pay off a chunk of your creditcard, question is, if you pay off your OD will you be tempted to use it again ? same goes for the card actually, are you intending to clear your debts for good, or just a temporary feel good payment ?.

buckeroo987

The overdraft charges work out at around 50% equivalent annual interest rate which is massive. If you can top it up to wipe out the whole lot and then pay £76 off your credit card a month that would probably be the best solution.

As sourcrates noted, you'd need to not use the overdraft again though. I cancelled mine as I can't be trusted!

Ladyluck1

Thank you. I'm currently only in my overdraft by £571 so it will be wiped out. I will be putting the overdraft down to £100 and only for emergencies (just incase something breaks and we can't pay for it!) or I may et rid totally... Not sure yet!
I thought paying the overdraft was the best option but I just wanted to make sure

hummingbird

Hi Ladyluck,

Your overdraft sounds very similar to mine.......is it £1 a day to use?

It would be great if you could wipe that out, I need to sort out doing the same asap!!!!

Ladyluck1

Yes it's £1 a day! Shocking... I couldn't equate it to apr in my head though (not very mathematically minded!)
Funds should be clear on Friday and then that's a huge load off my debt list. Just in time for my due date YAY

iancrt

Ladyluck1 wrote: »

Yes it's £1 a day! Shocking... I couldn't equate it to apr in my head though

Borrow £1 for 365 days will cost you £365 in charges, plus the £1 repayment.
APR is 9.5439168175753x10^19 %
or something like 95,439,168,175,753,000,000%
[EDIT: TBF I think this may be an error with the website]

If you max the overdraft all year
borrow £700 for 365 days it will cost you £1065 to repay
thats 438.5%

I didn't do this in my head either...
http://money-saving-calculators.prudentminds.com/apr-calculator.html

Note that this is simplified, no compounding has been taken into effect - so it assumes you borrow all the money for a full 12 months than pay in pack on the last day (which is what APR should be!)

buckeroo987

Not wanting to side track the thread as not really that relevant but repaying £1,065 on a £700 debt over a year doesn't equate to 438.5% interest as far as I can see.

If you borrowed £700 and repaid £1,065 in total, the 'interest' element is £365. That's 52% of the original debt in a yearly period.

Unless I'm missing something...

iancrt

buckeroo987 wrote: »

Not wanting to side track the thread as not really that relevant but repaying £1,065 on a £700 debt over a year doesn't equate to 438.5% interest as far as I can see.

If you borrowed £700 and repaid £1,065 in total, the 'interest' element is £365. That's 52% of the original debt in a yearly period.

Unless I'm missing something...

I agree. Maybe the website calculator is compounding - that could explain the spurious 95 zillion % interest on £1.