would you pay off overdraft or debts?

T

tim tay

Guest
Hi, I have a small business with a turnover of 700k, I am constantly running on my overdraft of 25k and often going over, especially nowadays! I have 40k in my personal savings.
Should I use my savings to pay off overdraft or to pay off my finance on vehicles etc, which amounts to about 2k per month. (have got plenty of work coming up in 2009).
Thanks
 
Hi Tim,

I'd suspect you are paying more in terms of interest rate on either overdraft or vehicle finance. If you don't think you'll need the personal savings in the near future I'd suggest you pay off the debt with the higher interest rate. If you are going over your overdraft limit beware of additional charges/surcharges.

As a tip, if you pay off the vehicle finance, then I'd suggest you 're-direct' that repayment in to a savings account to replenish your existing savings.

Good to see that '09 is looking good for you.

Regards,

BM
 
Is there a tax advantage either way?

I presume that you are self-employed rather than operating through a company?

You would be getting tax relief on borrowings for the business but probably not getting full tax relief on the the car finance. If so, then pay off the car finance.

Brendan
 
Tim - do you think your debtors are under control? What kind of balance are you running each month on average debt owed to you? And what is the average number of days it takes you to collect that debt?

If it is possible to improve on future cashflow, it might offset some of that overdraft.

Bob
 
You must log in or register to reply here.
Back
Top