best way to manage a debt

[NinjaChipmunk]

I have an overdraft of £2100, one credit card balance of £1800 and once credit card balance of £1300. I pay about £30 charged interest on my o/d, £70 a month and £40 a month on my two credit card balances.
What I am not sure of is how best to manage the debt to get rid of it quickest? Should I transfer both balances to a 0% credit card, and pay about £120 a month off but not tackle the overdraft (ie just keep paying for the facility but not pay any off) or should I get a personal loan to cover the lot over say 3 years and pay one regular monthly amount? I really don't know what would be best but would really like to tackle this. My budgeting (ie not going over my overdraft limit, not using either of my credit cards and being able to last the month) has been good for the last 18 months but now it is time to do something about it. If anyone has any wise words, please let me know!

Loan and pay it off monthly, cutting up/cancelling cards and closing overdraft facility at the same time. That way you will have a definite end date rather than having to face the discipline of paying of an amount of the credit card each month and maybe succumbing around Christmas/Holidays/Birthdays thinking 'I'll just pay the minimum this month'.

really dumb question but since I've never had a personal loan I need to ask - does it need to be from somewhere you have a bank account with or is it easy to shop around and pick the best deal/ lowest interest rates?

It comes down to maths. You have to work out the alternative scenarios and see exactly what the comparative costs are. Then run some what ifs to see which option would be the cheapest. You will need to know

• the interest rates on the credit cards, overdraft and bank loan
• the fee for transferring balances to a 0% card
• the length of time the 0% offer applies.
• how much 'spare' cash you have available to put towards debt repayment.

A good rule of thumb is 'pay the most expensive debt off first'. If you go the 0% card route, for example, pay the minimum only & use the money you save on interest to pay off the overdraft (which is bound to be charging more than 0% interest.) Once that is paid off, then pay the next most expensive debt i.e. the credit cards.

Well done for tackling your budget and not increasing the debts.

You can get loans on comparison sites. The rate you get will vary, however, according to your circumstances, credit rating and things like whether you are a homeowner. But - back to the maths - a loan charging 7 or 8% is cheaper than an overdraft costing 10% but more expensive than a credit card charging 0% even with a 3% balance transfer fee.

That's the kind of calculation you have to do.

OK I can feel a spreadsheet coming on tonight when dp is out and ds is in bed. Thanks for the advice, i think whats stopped me from doing anything is knowing deep down that i need to work all this out to see what works best!

It is a slightly tedious exercise but I would hate for you to, for example, lob the entire £5200 into a loan forthree years when you might be better off transferring the CC debts to a 0% card and just the o/d balance to a loan. There are a few online calculators about that can help you work out the real cost. If you're on your toes about it, budget carefully and happy to swap cards or bank accounts intelligently, you should be able to clear the debt reasonably cheaply and quickly.

The credit cards are likely to be the painful high interest that you will want to clear as priority (unless you play the game of chasing 0% interest for a few goes) but it will need to be balanced against the fact that banks do get a bit leery if you are always down at the bottom of your approved overdraft limit. So I'd agree a loan is a good way but do check how long your overdraft limit applies for and be realistic about the monthly repayments you can handle;
Some years ago I got a loan arranged to sort some credit cards debt and then had to take a second one out when the bank wouldn't renew my overdraft limit to put that account back into the black. That meant I was also forced to take some pointless expensive insurance premium out on the second loan or they wouldn't approve it. Not ideal and it cost me a fair bit more than a single combined loan would have done.