Overdraft- Need advice

enthusiasticsaver

virin96 wrote: »

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?

If you are paying £40 a month in overdraft charges I would lean more to redux suggestion. Get it paid off ASAP.

If you get paid £1300 into Lloyds and it is -470 you will be £830 in credit providing that overdraft has not increased. I would repay the minimum payment on the credit card and subtract your living costs from what is left for the month plus a £50 buffer and put the rest to Monzo. Hopefully in April you can repay Monzo and maybe start reducing the credit card. I would not open another account until you have the three you have sorted. Try not to use more credit until you are straight. I think you would be clear by May.

virin96

enthusiasticsaver wrote: »

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?

Hi,

Yes with monzo it is a flat rate of 50p a day and lloyds is 1p every 6 that im in overdrat (currently pay 78p for -469 in OD). My capital one is 35%APR.

virin96

enthusiasticsaver wrote: »

If you are paying £40 a month in overdraft charges I would lean more to redux suggestion. Get it paid off ASAP.

If you get paid £1300 into Lloyds and it is -470 you will be £830 in credit providing that overdraft has not increased. I would repay the minimum payment on the credit card and subtract your living costs from what is left for the month plus a £50 buffer and put the rest to Monzo. Hopefully in April you can repay Monzo and maybe start reducing the credit card. I would not open another account until you have the three you have sorted. Try not to use more credit until you are straight. I think you would be clear by May.

I think this is the best and most effective way of paying it off! Because I am reducing my debt big time but also will have money for living, etc.

MottledDebt

I would just pay off one a month so you still have money and dont end up going back into your overdraft. Close the overdrafts when you have paid them off so you dont use them again.

redux

An overdraft arrangement is flexible; it can float up and down, increase as well as decrease, so you don't need to formally think of paying back a certain amount a month (not on the one you're counting as main anyway).

It sounds like the Lloyds charges are slightly higher for the area you're in, so getting Lloyds down sooner than Monzo sounds reasonable, except that for a smaller overdraft balance later the Lloyds pro rata charge will become cheaper than the Mondo fixed rate.

So let the salary arrive in Lloyds, clear the credit card, transfer some to Monzo. You could always send a bit back from Monzo to Lloyds if you miscalculate.

Spending until the end of the month can be on the credit card, to avoid flirting with the overdraft limits (unless the credit card is also close). Whatever else, don't miss a minimum payment on the credit card if it comes due before the salary arrives. Maybe you can borrow a few quid from family if things are a bit tight until the end of this month.

EssexHebridean

virin96 wrote: »

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

But presumably now that you are earning regularly and a reasonable wage for a first job too that will be increasing? Have you discussed with them how much you should be contributing going forwards?

Personally I'd check back over statements and establish which of the overdrafts is costing you the most each month in fees - and get rid of that first. Neither are at a level where it is likely that they will be recalled, so you probably don't have too much to worry about there, but looking to get then gone is the right way of approaching things.

If you're tackling the credit card last, and no longer using it for purchases at all, then why not set the direct debit for that at a level just above the current minimum payment so it will continue to pay off at the same level while you'[re sorting the overdrafts? This will then leave you sightly further ahead with paying that off than just the decreasing min payment would. Do remember if you use the card to buy anything though you'll need to change it back again!

virin96

Hi guys,

Thank you for all the advice. I have made myself a plan on a spreadsheet to go by once I get paid. Not stressing as much now! Thank you all so much!

Mnd

That's fine, and its good to hear you got your plan and getting it sorted.
2 points, make sure there is a column for savings in your spreadsheet, and secondly don't forget your Dad/Gran are paying out expenses that you should be helping out with. Council Tax, water rates, tv licence, electric gas etc. £100 monthly seems low to me.
You sound level headed, and im sure you can sort this easy, good luck

Starmummy

Hi
You are in a really fortunate position. Living at home with no bills and a fairly good salary for someone with no commitments.

Firstly, I want to congratulate you on being savvy enough to want to sort your finances at a young age.

I would look at what your most expensive debt is and work hardest at that.
The total you owe is £1,250
Your monthly outgoings are £300 (being generous)
This means you have £1000 to tackle the (small) debt each pay period.

I am going to mention something no-one else has said.

YOU NEED TO START PAYING YOURSELF FIRST.
You are in the perfect position to start a financial education. Starting now put aside at least 20% of your earnings.
In this case that would be £260 per month (more if you want)
I would put this in either a regular saver or a Marcus account. (if you want to do some research you may want to look at S&S ISA's)

This would leave you with £740 to pay debt each month. Your debt will be gone in 2 months.
I'd start with the most expensive so say all of Monzo and part of the credit card this month.

Once the debt is gone, I need you to sit down and write yourself a plan. what are your goals? Do you want to buy a house? Are you saving for driving lessons? A holiday?

I'd continue saving your 20%- this should be your long term savings. Do not touch it.
Then you can work out how much out of the £740 you want to use towards your goals.
If it is a house you want to save for look into a Lifetime ISA.

I understand you didn't really ask for this advice but a financial education is something few people have and yet it can save you a lot of future stress and pain.

Good luck

SM

virin96

Mnd wrote: »

That's fine, and its good to hear you got your plan and getting it sorted.
2 points, make sure there is a column for savings in your spreadsheet, and secondly don't forget your Dad/Gran are paying out expenses that you should be helping out with. Council Tax, water rates, tv licence, electric gas etc. £100 monthly seems low to me.
You sound level headed, and im sure you can sort this easy, good luck

Yes I have made a section for savings! They told me 100 a month is alright for now since I just started my job and finished uni. But I would say, after my overdrafts are paid off, by beginning of June probably at the latest...I was going to give more then 100