Should I Concentrate on Paying my Overdraft or my Credit Card?

It can be difficult if we have a selection of debts to decide which might be the best one to repay first. There are many reasons for prioritising paying off one than the other and it can be very dependent on your personal situation so you will need to assess it yourself as there is no easy answer. However, there are a number of important factors that you need to look into and so it is worth thinking about these.


The cost of the loans is the most obvious place to start but comparing costs may not be as simple as it seems. It can be tempting to just look at the interest rate of each and then compare that. However, with both types of borrowing, there may be additional costs as well that you need to consider.

With a credit card. You will normally only be charged interest each month unless you completely miss a repayment. You will be expected to repay just a minimum amount each month and as long as you cover this then what you repay will be the interest. Each month you will receive a statement which will say how much the interest is and so this will enable you to know and compare.

With an overdraft it can be rather more complicated. There are two types of overdraft to start with. An arranged or authorised overdraft is one that your lender has agreed that you can have and there will be a certain interest charge and possible also a fee for this. An unauthorised overdraft is where you borrow money but you have not agreed with the bank that you can do so. This costs more money and could have a higher interest charge and have additional fees. Some may even charge a fee daily until it is repaid. Therefore, you could potentially be paying a lot more for an overdraft but it will depend on how much your specific lender charges.

How much you owe

The amount of money that you owe will have an effect as well. If you compare the actual monetary amount that you pay in interest, fees and charges then you will be able to calculate which is the most expensive. It is likely that if you owe more money on one then It will be dearer. However, this will depend on the charges of the specific lender.

You may feel that it will be easier to repay the smaller loan despite which is more expensive. Some borrowers find it less overwhelming if they can repay a smaller debt and it feels good to know that one will be paid off fairly quickly. This can be more motivating to them than saving more money. It is worth thinking about which might feel better for you. You may prefer to know that one debt is gone or you may prefer to pay off the dearer one and know that you are saving more money. Of course, it could be that your smallest one is the dearest so you will not have to make this choice.

Personal Reasons

You may have personal reasons for wanting to pay off one of the debts before the other. It could be that one debt really worries you and causes you stress so you would prefer to be rid of it. It might be that one lender is hassling you to get a debt paid off so you think that you should repay that one first. You may also have decided that you dislike a particular lender and so you want to get them paid off and forget about them sooner.

It can be quite a complex decision to make. However, you should be able to write a list of pros and cons in order to help you to decide. If you can calculate the cost of your loans it will make the decision easier for you as this can be an important factor. If you find it hard to calculate then you should be able to contact your lender and discuss it with them. They should be able to do the calculations for you and let you know how much you are paying in costs to them each month so that you are able to more easily compare them. Obviously, you will then need to start working hard in making sure that you keep your spending to a minimum so that you are able to afford those extra payments in order to get the loans paid off. It may not be easy but if you keep reminding yourself of the fact that you will soon be free of debt and not longer have stresses about money, then this should help you. Constantly thinking about ways to spend less and earn more, will help you but it is not always easy, so consider writing down some motivating words to remind you are the freedom that you will feel once the debt is gone to help you to feel better about it.

Should I Start my Business with a Loan?

Starting a new business is a very exciting prospect for some people. Being your own boss and being able to do something that you are passionate about can be really great. However, it can be expensive as it is likely that you will have start up costs. These will obviously vary a lot depending on what you are doing. However, many new business start with a loan so that they can buy what they need. There are pros and cons to doing this.

Advantages of a loan

If you have a really great business idea and are really passionate about starting it but have no finances to start up, then a loan can help. You will need to put together a business plan for the lender to show them your projected income as they will want to make sure that you will be able to afford the repayments. It is important to be realistic here as if you cannot afford the repayments then you will need to think about whether the business is a good idea.

If you wait and save up before starting the business then you could miss the gap in the market that you have seen. You may also just run out of enthusiasm for the business or get distracted by other things. Without getting a loan at all you might be able to start really small but you may not be able to grow if you do not have any money to spend on things.

You may be able to apply for a grant though. It will depend on what type of business you are setting up and where. Some councils will have grants available, particularly if you are starting a project that will help the community or taking up an empty shop on a struggling high street. It is worth checking for these grants as they could mean that you will not need to borrow money or that you will not need to borrow so much.

Disadvantages of a loan

The problems with all loans is that they are expensive and they have to be repaid. The cost of the loan might be justified with the amount of money that you can make from the business. As long as you can make more than enough to cover the loan repayments then you are profiting compared to not taking the loan and not being able to make any money at all. However, if you are not doing well and not taking much income then it may not be worth it.

A loan will also tie you in for a period of time. It is possible that the repayments could take a number of years or even a decade or so, depending on how much you borrow. This is obviously not the case for short term payday loans but for larger loans, the term could be significant.

This is a big commitment and it means that you will need to be sure that your business will be making enough money for all of this time to afford it. If your business idea is something that is currently on trend then you will need to think about what adaptations you might make in the future if your popularity goes down and the trend disappears. Also think about what you might be doing in your personal life in the future and whether you will still want to be running the business or if you might have less time to commit to your career.

You also have to make a loan repayment every month. This can be a big commitment, particularly if the loan was large. You will need to be sure that you can do this or else you will end up paying even more money back as you will have charges or fees to pay as well as the interest. You may find that the business has to go without things in other areas to afford the loan repayments and so you will need to do what you can to make sure that you generate enough income to afford them, all of your other expenses and have some money left to pay for other things. Ideally you want to be able to pay yourself as well.


It can be difficult to work out whether a loan is the right idea for your business. As you can see there are advantages and disadvantages to taking out a loan for your business and you will have to think about it in light of what you are specifically doing and whether you have any money to fall back on. You might want to make sure that you have some money to be able to cover repayments if you need to or to cover other expenses. Doing an accurate business plan is really important as well as this will allow you to see what projected income might be form the business. It can be tempting to be very optimistic, especially if you have a business idea that you think is really good, but try to be as realistic as you can as you may find that things are not quite as rosy as you predict. Have a back up plan in case things take longer to get established than you have predicted.