How to pay off debts - around £5k

kimwp

https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/

I found the link for the switching offers. (Above)

The best switch offer is £175. By contrast, if you got a money transfer offer of 3.95% on your remaining £2.6k debt and paid it off in the 0% period it would save you £169. 

My best advice for doing these switches and applications to different things is to at least read all the info on the relevant mse pages and research the potential trip-ups. For example, there might be penalties on paying off the loan early. Look at what invalidates a 0% offer. 

enthusiasticsaver

I would stay out of overdraft and cancel the facility to reduce your reliance on it.  The remaining £1k I would pay off the loan as a part repayment and continue to make overpayments or if you can get a 0% money transfer use that.  Debt consolidation is never a good way to deal with debts for future reference.  Have you sorted out your budget now so you are not likely to go back into debt?

If you have no emergency savings I would also address that whilst overpaying the loan/money transfer card. 

MFWannabe

EmilyInLondon said:

Hello, 

Wonder if I could have some help and advice on the best way to pay off my debts while paying minimal interest. I'm finding it a bit confusing... Over the past 5 years I have accumulated around £5k worth of debt in credit cards, overdraft and as a result of my most recent ex, as I ended up paying a lot more for bills, living expenses, car etc. 

My debt is made up of around £3.6k in a Sainsburys personal loan (which I took out last year for loan consolidation), and around £1.5k in my overdraft. 

I recently sold my car (I live in London so don't need it for work so I will go without for the foreseeable future) for £2.5k. After I sold my car I am no longer in my overdraft and I have an extra £1k. Which means I am just left with the Sainsburys loan to pay off. 

My question is what is the best way to pay off my debts while minimising interest? 

The Sainsburys loan has an interest of 10% so I end up paying around £35 per month just on the interest and I have around 18 months left of payments. The overdraft has a high interest (around 40%), I find that they don't tend to charge me a lot per month (max. £15 a month), because of the way the money comes in from my salary and the amount of days I'm on a minus of £2k (which is not a lot). 

Hence, it seems to me that being on my overdraft is a cheaper alternative to maintaining the Sainsburys loan and if I pay off the Sainsburys loan from my overdraft, I will end up paying less interest. If I do this, I will end up with a -£2.5k in my overdraft which I can slowly pay off with my salary. 

Are there any other cheaper alternatives? Would you recommend I get a 0% balance transfer card for some of the debt to pay even less interest? 

Hope this makes sense and sorry for the long post! 

Thank you, 
Emily

Personally if I were you I’d do the following: 
Stay out of your overdraft! You need to address the issue of your over spending and make a budget. Post an soa here if you need help and advise with this 
Put the 1k in a high interest easy access savings account as your emergency fund 
Check to see if you can make overpayments on your loan and pay off normal payments plus a bit extra which will reduce the amount of interest you pay 

TheAble

The interest you'll pay on that loan if you let it run to expiry is £300. It's really not that bad - I wonder if you're overcomplicating with this talk of new bank accounts and money transfer cards. 

Agree with MFW - stay out of the overdraft (even better, cancel it) and let the loan run, making overpayments as and when possible.

kimwp

NB It's worth doing an SOA (see link in my signature) and making sure your outgoings are less than your income. Note, that means all outgoings, literally everything that you pay for through the year - random spends, annual spends, little spends. And (if you don't know already) reflecting to understand why you are in debt, to avoid getting back into debt in the future. If you need any help with any of this, we are here 🙂