Pay off debt or remove overdraft - wwyd?

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A few weeks before lock down my husband secured his first job in 5 years (he has been a stay at home dad) and, due to this and me not spending money on days out for the first time in years I have some spare cash. I have managed to pay off my credit card which feels amazing and my next task was going to pay off a debt I owe to the LA for work done to my flat (I am a leaseholder). Its around £2.5 k - there is no interest and they never chase for the money. I could easily pay this off over 4 months in equal payments.

However It just occurred for the first time in I don't know how long I could ask my bank to remove my overdraft in its entirety this month and still have a little money left in my bank account. I pay £6 a month for the facility and have a terrible tendency to spend up to the limit so pay interest as well. Have my overdraft removed would mean I couldn't pay much off my LA debt this month (maybe £50) and would mean it would take me an extra month to pay it off.

So - what would you do?

Do you pay interest on your overdraft as well as the £6? If the LA isn't pushing for payment, I'd get rid of every other debt - it would be a great feeling! Then perhaps increase your payments to the LA along the lines of what you were paying on your credit card.

I would definitely get rid of the overdraft. When I had one a few years ago i would absolutely hate checking my bank balance and seeing a negative balance. It actually used to make me anxious as was a constant reminder I was in debt. Plus as you say there's the interest etc. It may not be much, but if the LA aren't pressuring you and aren't charging interest then it makes sense to get rid of the overdraft first.

When you say 'have your overdraft removed', do you mean pay off your overdraft so you get your balance back into the positive?

And then next month you'd be able to start paying off the LA debt?

If so, then yes, do the overdraft first, and stop using it as a habit! You can get your bank to reduce it so you're not tempted - it should be for emergencies only.

If you aren’t being chased for the money then I’d put into a savings account so you have some backup if you need anything short term.

Don’t overstretch

You could even split it, Half savings had to LA. This would mean a nice pot for you and the debt paid.

Pay the most expensive debt first - so clear your overdraft, then you can pay the LA back.

We've finally cleared all our overdraft. Feels great!

Definitely pay off your overdraft if no interest is being charged by the LA. Then start putting some money aside each month to pay off the LA.

Definitely the overdraft. It will be such a relief not to be relying on it. And it's more expensive than the LA debt. Then start paying it off from next month.

Overdraft will now be 40% interest so that first!
Jo

Pay the overdraft off, you’ll save money from the £6 plus interest.

I’m in a similar scenario so I’ve paid off 1K worth of debt so far, it’s a great feeling.
Hoping next month to clear another card or at least 3/4s of it.
So handy while direct debits are frozen.

Thanks so much everyone. Just removed my overdraft facility via my banking app - it feels scary and exhilarating all at the same time.

Getting rid of your overdraft is such a good feeling. I’ve kept mine as a just in case but haven’t used it for months. It’s great to get paid and not have it all swallowed up by paying off the overdraft.