Using an overdraft to pay payday loan?

azzroid

Hi everyone I am wondering if anyone can help me. I have done a few searches and can't find the answer anywhere.

I currently have a £7000 overdraft with Amigo Loans with an extortionate interest rate. Now I can't complain as I agreed to the terms on the loan. I have now been offered at £5000 overdraft on my HSBC account and been accepted. Am I able to use this to pay £5000 from my Amigo Loan? The charges on the overdraft are minimal around £100 a month if I'm at the limit of the £5000 for the full 31 days of the month. Whereas my amigo loan is currently at £260 a month! I've paid over £1000 in interest since March and I need to sort it.

If anyone could help that would be much appreciated

azzroid

I mean a £7000 loan with amigo not overdraft

National_Debtline

Hi Azzroid,


Using credit to pay off credit can end up being quite costly and you need to be careful. You will pay interest, on interest so it can end up costing you a lot more, not to mention that if you only pay the £100 fee for the overdraft then you are not actually paying anything off the original balance. You need to check for things like penalties on the Amigo loan, if you were to repay a lump sum early and whether that lump sum would reduce the monthly payments. If it won't then you could end up paying £360 just to cover the overdraft fee and the loan.


If the monthly payments on the Amigo loan are affordable then initially I would suggest you maintain them. Try and look at other options, rather than refinancing and see if there is an option (within the terms and conditions) to repay more per month and what, if any, penalty that would incur. Good luck,


Laura
@natdebtline

sourcrates

Hi,

Thats one way to do it yes, you would save some interest.

Just be aware overdrafts are repayable on demand.

Can you make over-payments on the amigo loan without penalty ?

azzroid

thank you both for your responses.

there are no charges on me paying anything early with amigo loans. I quite frequently pay double my monthly payment back to reduce the balance asap.

I took a £7000 loan in March to pay over 5 years at £308 a month. I have paid back double each month as the interest rate ends up being around £270 on the balance alone.

The only reason I am thinking of using the HSBC overdraft is due to interest. I'd rather pay £100ish a month than £260 a month it's ridiculous. with the HSBC overdraft I can pay it off quicker so the interest will shrink a lot quicker.

Silver_Queen

Theoretically it would work but just be aware that HSBC could revoke the overdraft at any point which would leave you in a bigger mess. Also make sure you don't fall into the trap of spending and spending and then ending up with a huge payday loan AND an overdraft.