Consumers have been advised to switch overdraft debt to a
personal loan in order to save money.
Some
savings account holders in the UK rely on their overdraft facility to the extent that they are permanently in the red.
However, MoneyDashboard.com chief executive Gavin Littlejohn said it can be an effective strategy for such people to take out a
personal loan to pay an overdraft off, as the interest will be significantly cheaper.
Mr Littlejohn advised that it is important to set out a monthly budget which is realistic and affordable in order to mange repayments.
"If you're [permanently overdrawn], consider converting your overdraft (and any other debts you have) into a
personal loan, as the interest is likely to be considerably lower," he explained.
"For example, if you need £5,000 to pay off your
credit card and overdraft, you can pay interest of as little as 8.8 per cent APR over three years, with a total repayment of £5,679."
Overdrafts can land savers with unexpected debt if not managed correctly, with recent stories that graduates are being caught off guard when their facility becomes liable for higher interest fees after three years of study time.
