Debt priorities

[juliemam8]

So December last year I had around £8000 worth of debt. This was a mix of credit cards, overdrafts, a payday loan and some furniture finance. I got myself into financial difficulty at the start of 2023 hence why I made the mistake of racking up loads of debt. (Have learnt my lesson now)

I'm proud to say out of the 7 debts I had, I now only have 3 left. I have an overdraft of £2150 left at an interest rate of 39.94% which works out currently £60 ish a month. Obviously this would get lower as I pay more off.
I have a payday loan of £2300. This is very high interest but I have set up a repayment plan of £100 a month so the end amount is now fixed but obviously will take some time to pay off.
Then I have a 0% finance loan for a piece of furniture which I'm paying off each month with the agreed monthly amounts.

When thinking of my overdraft and payday loan, which one should I prioritise? I know it seems like the sensible option of payday loan first due to credit score purposes but currently it's a fixed amount per month and it's my overdraft that's racking up more interest.

Advice would be appreciated, sorry if I'm being thick.

They are a similar amount, so the one with the highest interest. Pay as much as you can as quickly as you can.

For the others, pay the agreed minimum or set your own minimum.

For the 0% finance one, take the remaining time left and set the minimum payment so it pays off before the end of the time. Example: £1100 left to pay, 12 months left to pay it, £100 per month clears it before then 12 month point.

I assume the payday loan is much higher interest so I’d pay that down as fast as possible. It sounds like you’re doing well so you just need to pay off as much as you can each month.

Is there any way you can restructure the debt to get it on 0% interest (paying a balance/money transfer fee) or low interest rate? Those interest rates are a killer!

A huge well done on your achievements so far. I'm doing similar, am 15 months in and have 5 months to go, can't wait!

Can you transfer any of the dept onto a 0% credit card or even get a loan at a lower interest rate?

I find it hard to believe that the payday loan is less than 40%.

If you can’t shift anything to 0%, I would:

• pay the minimum payment on the overdraft.
• throw every extra penny at the payday loan, getting it paid off as quickly as possible.
• once payday is 0, throw every extra penny at the overdraft (39% is realllly high—typical for an overdraft, but a really expensive way to borrow).

I feel like these should have been the ones you tackled first. What were the interest rates on the debts you've paid off?

@juliemam8 You have done well to clear down some of your debts and I think you need to look at Moneysavingexpert.com This is Martin Lewis' forum for advice on all things financial.
It sounds like you would benefit from snowballing where you throw everything possible at the highest interest bearing and when that is gone throw the payments from that to the next debt and so on.

You're not being thick at all—your question is very sensible, and you're making significant progress in managing your debt. Given your current situation, prioritizing which debt to pay off first involves looking at the cost of each debt, particularly the interest rates and the total amounts.
At 39.94%, your overdraft is costing you significantly in interest charges. The £60 per month is purely for interest, and this will decrease as you pay down the principal.
Although payday loan typically have extremely high-interest rates, your fixed repayment plan of £100 per month means the total interest cost is already calculated into this repayment. You can check daysloan.com for low interest rates.

Whichever has the highest interest and is costing you more in the long run. Pay that off first. Well done for getting back on track with it.

Big advice, if you can overpay at all, whenever, please do - interest is a killer.