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Organising what to reduce first - overdraft or loan?

40yearoldgraduate
Posts: 11 Forumite

In a couple of weeks I will have £1600 which I want to use to reduce either my loan or my overdraft but I'm not sure which one is best to reduce. I'm finding the difference between APR and EAR confusing so hopefully this is the place to be educated 
What I do know is that I need to make a decision so I can get this money transferred out of my account as soon as it lands so I don't get tempted to spend it......
Loan: LLoyds APR Current balance: -£1,801.07
APR: 11.9 % (the settlement figure is £1833.75) paying £1600 off this loan will leave me with a balance:£201.07
Repayments remaining:2 months
Repayments reduced by:16 months
Interest saved:£162.00
Overdraft Lloyds - currently at £2250 and I go up to this limit this every month. EAR is 19.94%
Which ever one gets reduced the other is next on the hit list. I've gone through some statements and generally pretty shocked at how my bad spending habits have crept back up on me again hence why I know I need to get organised with this money I have coming! I also hope that seeing one of these reduce will give me a good kick to get back to being better with money.
If I do pay the loan off first then I'd arrange to reduce the OD by the £100 per month that would have been going on loan payments..... but which is the better one to reduce first?
All help gratefully received!

What I do know is that I need to make a decision so I can get this money transferred out of my account as soon as it lands so I don't get tempted to spend it......
Loan: LLoyds APR Current balance: -£1,801.07
APR: 11.9 % (the settlement figure is £1833.75) paying £1600 off this loan will leave me with a balance:£201.07
Repayments remaining:2 months
Repayments reduced by:16 months
Interest saved:£162.00
Overdraft Lloyds - currently at £2250 and I go up to this limit this every month. EAR is 19.94%
Which ever one gets reduced the other is next on the hit list. I've gone through some statements and generally pretty shocked at how my bad spending habits have crept back up on me again hence why I know I need to get organised with this money I have coming! I also hope that seeing one of these reduce will give me a good kick to get back to being better with money.
If I do pay the loan off first then I'd arrange to reduce the OD by the £100 per month that would have been going on loan payments..... but which is the better one to reduce first?
All help gratefully received!

0
Comments
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Given that the OD is at a higher interest rate, and the loan repayments are all set up (whereas repaying the OD would require you to be organised enough to reduce it month on month) I think I would be inclined to pay off the OD and have the bank to reduce the limit to £1600 less than it is already once the money has been paid off it.Total Starting Debt August 2014- £38,061
Current Debt- £3600
Mortgage Offset Savings- £600
90.5% paid off so far...0 -
i would hit the OD for two reasons: 1) the % is higher 2) they can withdraw this facility and ask for the full amount at any time.Mortgage-Free WannabeMortgage at start [20/6/12]: £151,800/MFD Jun 2035 (age 65)Mortgage now [5/11/14]: £139,212.14/MFD Oct 2029 (age 59)Personal Library 2014:starmod: Read in 2014: 57/60 :starmod: In Progress: 2 :starmod: Books In: 94 :starmod: Books Out: 12 :starmod: TBR: 847 :starmod:0
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Thrifty_Pixie wrote: »i would hit the OD for two reasons: 1) the % is higher 2) they can withdraw this facility and ask for the full amount at any time.
I was going to say this, two very good reasonsLIVE SIMPLY * GIVE MORE * EXPECT LESS * BE THANKFUL0 -
thanks everyone- I wasn't sure how the EAR worked compared to APR but seems reducing the OD (then working on clearing that last chunk before looking at the loan) is the way to go then.
I'll be on the phone as soon as I see the money has gone in and ask the bank to reduce it accordingly. Looking forward to making that call! :j
The thought of getting rid of these debts has spurred me in to action a bit as I've been trawling various threads for money saving ideas this afternoon, looked through the cupboards/fridge/freezer and worked out that I could definitely get away with only minimal grocery shopping for at least a month and have begun sorting out the spare room which has had a pile of stuff to list on Ebay for about 18 months.........so with any luck I'll be able to shave a bit more off the OD than £1600 by the time the end if the month gets here.
Thanks again for your time and help - feeling motivated!:beer:0 -
Got for it! You'll have it cleared in no time :TTotal Starting Debt August 2014- £38,061
Current Debt- £3600
Mortgage Offset Savings- £600
90.5% paid off so far...0 -
sounds like you've caught the MSE bug...good luckMortgage-Free WannabeMortgage at start [20/6/12]: £151,800/MFD Jun 2035 (age 65)Mortgage now [5/11/14]: £139,212.14/MFD Oct 2029 (age 59)Personal Library 2014:starmod: Read in 2014: 57/60 :starmod: In Progress: 2 :starmod: Books In: 94 :starmod: Books Out: 12 :starmod: TBR: 847 :starmod:0
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