Loan or overdraft

jigglypig

I am overdrawn by £1300 is it better to pay this off slowly by reducing my spending or get a loan to pay it off?

Kavanne

You need to ask yourself if you have the committment necessary to do it.

A loan MAY be at a higher interest rate than your OD, but if you can pay it off quicker with structured repayments instead of just 'trying' to reduce your spending then you may end up saviing yourself interest in longer term.

Can you stick with reducing your spending or do you need a fixed repayment?

Rafter

For a small loan like this, depending on your overdraft rate, you are unlikely to save any interest by converting your overdraft to a loan.

As Kavanne says, you need to give some structure to how you are going to repay it. Maybe set yourself a reasonable budget and open a second 'basic bank account'. Work out how much you need to keep in your main account to cover direct debits and to repay say £150 a month from your overdraft. Then transfer the rest to your 'basic' account and that is what you have to spend that month.

R.

needabiglotterywin

when i find iv a bit extra iv not spent in my overdrawn account, i get the bank to reduce the overdraft so it slowly gets it down, then your not tempted to spend it again!

jigglypig

Thanks for your advice all.