Personal loan to pay off overdraft?

foster95

i currently have a overdraft of £750 and earn £1000 a month. my month outgoings are around £450, on the 1st of feb i will have £282 taken from direct debit putting me into my overdraft and even more by the 25th. i will have around £300 dissposble income but struggle to save having to pay for small things like fuel etc. i was thinking of taking a small loan of around £2000 from my bank lloyds to pay off my overdraft and have £1250 left as disposable income but plan on saving each month and cut back on spending. my total monthly outgoing would be £520 each month giving me around £480 to add to my savings each month, in hope by the time i have paid of my loan i will have saved a few thousands? is this a smart move or stupid as i may be missing a lot of information? thank you.

Gaz83

It's a stupid move.

You have debt of £750 and want to turn that into debt of £2,000? And that somehow makes it better?

Assuming that Lloyds aren't in a hurry to recall the overdraft, set yourself a target of reducing it by £50 a month. So if you're £750 into it this payday, aim to be £700 into it the next, then £650, and so on. That way you'll be out of it in just over a year's time.

Turning £750 debt into £2,000 is madness.

enthusiasticsaver

Sorry it is stupid and it will set you on to a path of debt. A bit of tough budgeting now and you can easily get out of this debt. Consolidating on to a loan of £2k more than doubles it immediately.

Your biggest problem is you do not earn enough. Is that £1k for a full time job? The overdraft has occurred due to you spending more than you earn.

Do you budget and do you have any other debts? What outgoings are that £450? If you earn £1000 per month and have £450 outgoings you have £550 spare each month to live off and reduce your overdraft. Out of that you should be able to spare £100 each month to reduce the overdraft. That means mentally reducing the overdraft by £100 each month until it is gone. So by end of February overdraft should be £650, end of March £550, end of April £450 and so on until it is gone. It is doable now so please address this before the debt gets bigger.

Ultimately the only way to stay out of debt is to spend less than you earn. Keep a spending diary to see where your money is going. On a low income it is even more critical to do this.

PeacefulWaters

Spend less. Don't borrow more.

-taff

If you can't get rid of a 750 overdraft now, how do you think you'll do it when you owe 2,000?
PLan on saving and cutting back on psending now, not when you owe mych more money.
Go to the debt free wannabe board for help with your budget.

dresdendave

foster95 wrote: »

i currently have a overdraft of £750 and earn £1000 a month. my month outgoings are around £450, on the 1st of feb i will have £282 taken from direct debit putting me into my overdraft and even more by the 25th. i will have around £300 dissposble income but struggle to save having to pay for small things like fuel etc. i was thinking of taking a small loan of around £2000 from my bank lloyds to pay off my overdraft and have £1250 left as disposable income but plan on saving each month and cut back on spending. my total monthly outgoing would be £520 each month giving me around £480 to add to my savings each month, in hope by the time i have paid of my loan i will have saved a few thousands? is this a smart move or stupid as i may be missing a lot of information? thank you.

Looks like you knew the correct thing to do all along.

DCFC79

PeacefulWaters wrote: »

Spend less. Don't borrow more.

Or take on a second job or even do both.

Don't go out or go out less often, eat very frugally, only drive when necessary.

molerat

How much is this overdraft costing you each month in charges ?

If you have £480 "spare" each month why has the overdraft not disappeared in 2 - 3 months ? I am struggling to see how borrowing £2K will help you save more.