Paying off debts with savings?

Squirrel29

I currently have a £1100 overdraft limit and due to budgeting I now end the month at about the -£890 mark. The od is with Nationwide and I pay 9.9% on it so pay about £4-5 per month for this facility. I have £1000 in e-savings and a £100 premium bond.

I know it makes sense to pay the overdraft off and get in credit plus cash in premium bond as the chance of ever winning anything is virtually nil, trouble is I seem to have a mental block in being able to do this.

My savings come from a matured savings plan that I paid for 10 years that cashed last October (I have spent the other half on a holiday as I felt I deserved a treat for paying it this long). For that reason I find it really hard to use it to pay the od off, it is nice to see my e-savings with a £1000 in! It would even make more sense to pay some of my 16.9% credit card but mentally I would rather pay off the overdraft if I had to choose.

I have really embraced the MSE way and even though my head tells me to pay off the o/d as it costs more than the savings earn.. my heart likes to see the savings pot. Ahhhh!

lilmissmup

I have £400 in savings right now and i am having the same struggle as you, its so nice to see some money that is mine that i don't want to pay off debt with it :rolleyes:

I am going to have too though but think am going to keep going with the saving until May when i should be able to pay off my loan 5 mths early

Keeping_Positive

Snowball would say pay off cc etc but like you when I do get the chance I would like to build up some savings to cover unforseen things. It would hopefully stop me using credit again to pay for things. I have found out that I can make regular overpayments on my loan but dont think Im interested until I get a small buffer in savings.

moo2moo

Surely if you are -£890 on your overdraft then you've already spent your £1000 e-savings. The interest on your overdraft will be more than the interest you get on your e-savings. The answer seems screamingly obvious. Pay off your overdraft. You're very fortunate that you have this as an option. It still leaves you with £110 in your savings account. If you have a credit card pay that off first. The £5+ monthly interest charges are better off in your savings account than disappearing to a credit card company.

bandraoi

moo2moo wrote: »

Surely if you are -£890 on your overdraft then you've already spent your £1000 e-savings. The interest on your overdraft will be more than the interest you get on your e-savings. The answer seems screamingly obvious. Pay off your overdraft. You're very fortunate that you have this as an option. It still leaves you with £110 in your savings account. If you have a credit card pay that off first. The £5+ monthly interest charges are better off in your savings account than disappearing to a credit card company.

Not necessarily, £1000 could be put in an ISA at 6% at the moment which would earn the OP £60 a year or £5 a month.
£1000 in an ISA earns interest all month. The overdraft is not at -£890 for the whole month, depending on someone's spending patterns the overdraft can work out cheaper.