Loan Vs Credit Card

poshpet

Hi I have £1700 on my credit card at a rate of 34.9% APR and I am £500 into my overdraft which is interest free. Is it a good idea for me to take out a personal loan to pay these off? If it is how much will I save on the interest if I pay it off over 1.5 - 2 years.

Thanks

silverbullit

Your priority should obviously be to reduce/repay the CC debt due to the high interest rate you're being charged; since the overdraft is interest-free, this is less of a priority. If the limit on your interest-free OD permits, you should max it out and repay as much of the CC debt as possible.

If your credit rating is such that you'd be able to get a loan, perhaps it would be preferable to take out a 0% balance transfer card instead and then transfer the £1,700 to the 0% card. That way, you'd have some breathing space from the interest for 12 months during which you should be saving a regular amount for when the 0% period comes to an end.

Have a look at Martin's article on 0% balance transfer cards- http://www.moneysavingexpert.com/cards/balance-transfer-credit-cards .