Overdraft Help please 30 June 2020 at 6:38PM in Debt-Free Wannabe 5 replies 411 views

Gidged500

Hi guys , hope this is in the correct section. 

I have an overdraft of 6k and I’m wondering if it’s best to get a loan to pay this off or a credit card ? 

I wouldn’t know what credit card to go for or what to do so the loan seems a better option 
look forward to the help thank you 

MallyGirl

In order to transfer the debt from an overdraft to a credit card you would need to get a money transfer card (not a balance transfer). These come with a fee of around 3-4% and tend to not have massively long 0% deals so you would need to be careful- if you cannot pay it off before the end of the 0% you are going to be hit with credit card rates on the remainder.
A loan might be cheaper if you qualify for a decent rate.

monetxchange

£6k is a fair old chunk of change to get a money transfer card for, especially if you've not got a great credit history - an assumption, but basing it on the start of my own debt journey where I just about managed £2k transfer to clear the overdraft as I wasn't exactly prime lending material!

To be honest, I wouldn't get a loan. I'm guessing you're unlikely to get decent rates if you're at this stage of overdraft debt. It's just basically borrowing more money to pay debt - NOT debt clearing. This forum is full of people that have taken the loan, spent it and ran up the overdraft again too.

Consolidation rarely works as it doesn't address the issues. Why are you in debt? What caused it to get to this stage - bad times, living beyond your means? If you don't address the issues in your budgeting at the start, you won't maintain being debt averse in the future. Posting an SOA on here would help everyone advise. Well done on taking the first step of facing up to it!

BabyStepper

Most people posting for help with paying off debt have taken on a variety of different debts over the years. It seems unusual that you only have one, that it's an overdraft and that it's so huge for this type of debt. Are there other debts you're just not worrying about so much at the minute? 

If you post your soa we can better help you work out a plan. Remember to put all your expenses in it (check old bank statements) and all your debts too (with interest rates). 

greensalad

I think it can help if you feel it's a monetary gain in terms of the interest saved, as overdraft interest can be high. My main concern would be addressing why you have this debt and whether you are likely to run it up again (plenty of us have fallen into that trap, myself included). What you don't want to have happen is get a £6k CC to transfer it on and then run it up again. Have you broken the cycle of debt? Are you no longer dipping further into your overdraft each month? Do you trust yourself?

If the answer to all those questions is 100% yes then it could be a good idea, but you'd need to get a 0% money transfer which could be quite hard.

Fireflyaway

I'd strongly advise not to get a loan or credit card. It's just moving the money around. 
I paid down a 1k overdraft recently. I did it by reducing the overdraft by a small amount each month. Do a budget so you know how much you have left to reduce the overdraft each month but ensure you do reduce it with the bank of the temptation to use it will still be there. 
I'd also recommend speaking to the bank. Explain you want to reduce your overdraft and they may help you out. Mine agreed not to charge interest for 6 months. It's worth asking.