What is the best way to save money on your overdraft?

For many people, an overdraft is like a sword of Damocletes hanging over their head, a large sum of money that they find impossible to pay off. 

On Lunchtime Live, Paul Merriman of Ask Paul said a person with an overdraft of €1,000 should consider paying off a much smaller sum every month. 

“Unless you put a plan in place to clear it, you'll just live in it forever because it's too hard to find €1,000,” he suggested. 

“So, what you're better off doing, if you have an overdraft you can't get control of, is just bring it down slightly every month. 

“Reduce it by €100 a month this month, another €100 next month; in 10 months time, you should have no overdraft.”

Mr Merriman added that it is also worth asking your bank for a loan to clear the overdraft, which will typically mean a lower rate of interest. 

“Overdrafts in Ireland cost between 11 to 15%,” he said. 

“In some cases, you're better off just going into the bank and asking them for a term loan, maybe 8% and clearing it over a year with a term loan, having your money back in your current account.”

Main image: A bank card. Picture by: Maryia Kazlouskaya / Alamy Stock Photo