Pay off Loan vs Overdrafts

opini0ns4u

Hey all,

I have a natwest loan for £6000 which i have spread over 6 years.

I also have an interest free overdraft of £1800 with natwest and a £2000 overdraft with Santander.

I have some surplus money and was wondering who i should pay off first?

I assumed that since the loan payments are leaving my account on time with no issues, it would be best to reduce both my overdrafts and bring my accounts back into a positive balance first before attempting to pay off the loan.

Anyways, i would like to hear your thoughts

redpete

Generally it is best to pay off the most expensive debt - i.e. that which is charging most interest. This won't be the interest-free overdraft.

The answer might be different if there is some reason that you need to reduce your overdraft rather than your loan, but I can't think what this might be.

opini0ns4u

right ok!

the only reason i was considering reducing the overdrafts first was because the interest free terms will be coming to a stop in the near future.

redpete

Well in that case you would have to take into account when it is due to start charging interest, how much that interest will be and how much cash you have to use to pay off the debts (and mention all relevant info when asking such questions).