Overdraft- Need advice

virin96

Hello,

I currently have a £500 OD limit with lloyds and Monzo bank each. I am about -£470 with lloyds and -£490 with Monzo and also a credit card bill of £290 that I need to pay off. I have that debt because of uni, etc. I just started my new job last Monday and will earn around £1,300 monthly. I live with my dad and grandma so I am rent free and just help out with groceries £50-£100 a month plus my spending which is about £100-£200 a month. Is it better to pay it all off in one go and then go back into overdraft for another month but finally be in credit come end of April? Or should I pay back the debts month by month? My wages will also be paid into my lloyds account end of March, so should I maybe open another account and have my wages paid into that account? Thanks.

sourcrates

Hi,

I’m assuming you are a young chap/chappess, paying back over time would be preferable, so you don’t leave yourself short of cash.

Take the opportunity to pay it back, before rent or mortgages hove into view.

fatbelly

Martin has written a useful piece about getting out of your overdraft

https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

redux

Unless you've been given notice to repay both the overdrafts, I don't think you have a problem.

If you have, it might be worth opening another account to receive that salary, and spread repayments to the others over 2 or 3 months. But even then, a chat our two would probably sort things out.

Otherwise, the money at the end of the month could almost clear the 3 accounts, then use whichever is the cheapest borrowing to get through April's spending.

virin96

Hi guys,

Thanks for the replies. It really helps. At this point, I’m just deciding what to do. I’m just caught between paying it all off like redux says or spreading it over acourse of few months like sourcrates says. I also have not received any notice from either of the banks to repay them back (unless I do in near future). Just lost on what to do as of right now.

Socajam

I would pay off the lowest debt first; take the money from the lowest and put that towards the second debt. Once you have paid off two of these debts, then concentrate on the highest.
A word of advice: once you are debt free: start saving for an emergency fund and a life happens fund.
Since you do not pay rent, once the debts are gone, I would save at least £500 between the two funds. Before you know it, you would have some serious savings.
Try and stay away from the OD, the APR is normally very high. Live as you are unemployed, trust me having that money in the bank will come in handy one of these days.

geemel79

If it’s still classed as a student overdraft and is free or is an overdraft with a low rate then pay off the other debts first and don’t worry too much about them, personally though the extra money from first few months wages compared to what you would normally live and commute on I’d just clear the debt and then start saving, it’s too easy to start picking up bad habits but if you’ve lived on less before the job then you know you can again, we all too easy get in the habit of spending it just because it’s there

virin96

So my best bet would be to pay off 200 on each account each month (would be less then 200 due to OD charges, more like 180). Within 3-5 months, my OD would debt would be fully paid off. I am kind of not too keen on paying it all off in one go and then being in negative again. I would rather pay it off each month, but at least ill have a separate bank account in credit. Anyone else have anymore advice?

virin96

Socajam wrote: »

I would pay off the lowest debt first; take the money from the lowest and put that towards the second debt. Once you have paid off two of these debts, then concentrate on the highest.
A word of advice: once you are debt free: start saving for an emergency fund and a life happens fund.
Since you do not pay rent, once the debts are gone, I would save at least £500 between the two funds. Before you know it, you would have some serious savings.
Try and stay away from the OD, the APR is normally very high. Live as you are unemployed, trust me having that money in the bank will come in handy one of these days.

What do you mean by take money from my lowest debt and put that towards second debt? Would it be more sensible to pay each account off every month and eventually after 4-5 months, it will be paid off?

enthusiasticsaver

I would pay it off over the shortest period you are able to afford it as overdrafts can easily become a habit people get used to living with. I would prioritise those over your credit card and especially if your outgoings are low.

Then focus on building up savings rather then spend every penny you earn. Great habits to start your working life with. I am assuming you are young?

enthusiasticsaver

virin96 wrote: »

What do you mean by take money from my lowest debt and put that towards second debt? Would it be more sensible to pay each account off every month and eventually after 4-5 months, it will be paid off?

Socajam means pay off lowest debt first which is your credit card then the next lowest which is Lloyds then Monzo.

Personally as you bank with Lloyds I would pay that off first and ge5 yourself in credit. Then target Monzo then the credit card but that depends on whether any of them are costing you anything.

I would be wary about committing all your spare money towards repaying debt until you know how much it will cost you to live. Travel costs, food for lunches etc etc. It is relatively low so repaying it over 2 or 3 months should be possible with low outgoings.

Do you pay interest or charges on any of them?