Which Debts to pay
New_Guy_2016
Posts: 107 Forumite
Hi All,
Looking for some advice on what to do with an up and coming lump sum of money. The idea is to reduce debt as much as possible but want to make sure it is the right debt long term and not just picking the highest amount I can pay off.
In summary I have 13k coming to me in a couple of Months and have significant debt which although I am comfortably paying every month this lump sum gives me an opportunity to get rid of a lump and potentially put me in a good position for paying the rest off.
I have listed my debts below with amount owed and payments. In terms of the loans they are all due to finish within the next 3-4 years. My initial view is to pay off as many credit cards as possible as the other debts have an end date already so no risk of going past that unlike credit cards. Also the credit cards are likely the highest Interest. Also for other reasons a portion of the debt will go to paying back some of a loan from my parents.
Another option before I go ahead paying the debts is could I offer my credit cards a final settlement figure and maybe get a bit knocked off and use that money on something else. Likely a long shot as they would have no reason to offer me a settlement figure I presume.
Debt Amount Monthly Payment Pay Off Monthly Savings
Capital One £2,550.00 £83.00 £2,550.00 £83.00
Capital One 2 £200.00 £7.00 £200.00 £7.00
Barclaycard £1,200.00 £44.00 £1,200.00 £44.00
IHG Credit Card £5,000.00 £143.00
Vanquis £2,000.00 £98.00 £2,000.00 £98.00
Aqua £1,600.00 £80.00 £1,600.00 £80.00
Vanquis £2,000.00 £50.00
Barclay 2 £1,200.00 £65.00 £1,200.00 £65.00
MBNA Credit Card £1,500.00 £50.00 £1,500.00 £50.00
Tesco Credit Card £250.00 £10.00 £250.00 £10.00
Dorothy Perkins store Card £250.00 £10.00 £250.00 £10.00
Very Cataogue £1,500.00 £10.00
Car Loan £9,508.74 £250.23
DFS Furniture Loan £1,263.36 £60.16
Evolution Second Mortgage £21,155.04 £440.73
Parents Loan £7,582.00 £223.00 £2,230.00 £223.00
£58,759.14 £1,624.12 £12,980.00 £670.00
Amount
Lump Sum £13,340.00
Debts paid £12,980.00
Lump Sum Left £360.00
Monthly savings £670.00
I have already above just picked out the highest Interest Credit Cards along with my parents loan to pay off initially as this gives me the highest monthly saving I can see to then start ploughing those savings into the other dates to get a snowball affect you could call it.
Any help appreciated and apologies for the formatting of the list as for some reason I am not able to upload an image
Looking for some advice on what to do with an up and coming lump sum of money. The idea is to reduce debt as much as possible but want to make sure it is the right debt long term and not just picking the highest amount I can pay off.
In summary I have 13k coming to me in a couple of Months and have significant debt which although I am comfortably paying every month this lump sum gives me an opportunity to get rid of a lump and potentially put me in a good position for paying the rest off.
I have listed my debts below with amount owed and payments. In terms of the loans they are all due to finish within the next 3-4 years. My initial view is to pay off as many credit cards as possible as the other debts have an end date already so no risk of going past that unlike credit cards. Also the credit cards are likely the highest Interest. Also for other reasons a portion of the debt will go to paying back some of a loan from my parents.
Another option before I go ahead paying the debts is could I offer my credit cards a final settlement figure and maybe get a bit knocked off and use that money on something else. Likely a long shot as they would have no reason to offer me a settlement figure I presume.
Debt Amount Monthly Payment Pay Off Monthly Savings
Capital One £2,550.00 £83.00 £2,550.00 £83.00
Capital One 2 £200.00 £7.00 £200.00 £7.00
Barclaycard £1,200.00 £44.00 £1,200.00 £44.00
IHG Credit Card £5,000.00 £143.00
Vanquis £2,000.00 £98.00 £2,000.00 £98.00
Aqua £1,600.00 £80.00 £1,600.00 £80.00
Vanquis £2,000.00 £50.00
Barclay 2 £1,200.00 £65.00 £1,200.00 £65.00
MBNA Credit Card £1,500.00 £50.00 £1,500.00 £50.00
Tesco Credit Card £250.00 £10.00 £250.00 £10.00
Dorothy Perkins store Card £250.00 £10.00 £250.00 £10.00
Very Cataogue £1,500.00 £10.00
Car Loan £9,508.74 £250.23
DFS Furniture Loan £1,263.36 £60.16
Evolution Second Mortgage £21,155.04 £440.73
Parents Loan £7,582.00 £223.00 £2,230.00 £223.00
£58,759.14 £1,624.12 £12,980.00 £670.00
Amount
Lump Sum £13,340.00
Debts paid £12,980.00
Lump Sum Left £360.00
Monthly savings £670.00
I have already above just picked out the highest Interest Credit Cards along with my parents loan to pay off initially as this gives me the highest monthly saving I can see to then start ploughing those savings into the other dates to get a snowball affect you could call it.
Any help appreciated and apologies for the formatting of the list as for some reason I am not able to upload an image
0
Comments
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Are you in arrears with any of the debts? If not that I don't think you'll have any joy with F&F offers. That leaves you with using the £13k to snowball your debts by paying off those with the highest interest rates.0
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Hi mate post up a soa http://www.stoozing.com/calculator/soa.php
I would pay the smallest debts first, but it depends on your soa and how much extra cash you have at the end of the month, which you can throw at the debts in effect snowball
this is a non judgmental forum so dont think we will have a go at you for getting in to debt, we have all been/are in debt hence the reason we are on here good luck“People are caught up in an egotistic artificial rat race to display a false image to society. We want the biggest house, fanciest car, and we don't mind paying the sky high mortgage to put up that show. We sacrifice our biggest assets our health and time, We feel happy when we see people look up to us and see how successful we are”
Rat Race0 -
Hi There,
No none of them are in arrears so yes I am thinking like you that the credit cards will just say we have no problem with the way you are managing your account so not in our interest to end the account let alone offer you a F&F settlement.0 -
No I know no one judges on here mostly as like most I take full responsibility for my debts but want to find a way to get rid without trying to shirk my responsibilities.
Without going into an SOA currently after I pay my standard bills like food, petrol, phone, gas etc and then all the debts I listed above I have about £400 left over to last me the month. I am not putting anything to savings at the moment at my philosophy (which may be wrong) is better start chucking all my spare cash at the debts and then start saving. Plus I have quite a bit of equity in my house so even though not direct cash I am building a good nest egg there. So with the saving I get by paying off debts with the 13k it will add to this £400 initially. So my rough view was pay off the credit cards as do not have a contract end and the highest monthly payments so would then give me a lot more monthly (near 1k potentially) to start chucking at other debts.
However I am wondering if there is another viewpoint as you say like pay off the smallest first that may benefit in the long run. Without sounding stupid what is your reasoning for say paying off the smallest first?0 -
You pay the highest interest debts first. There is no logic to paying off small debts if you're left with amounts at higher rates.0
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Yeah I am no expert so my view was to pay off the credit cards as they are high interest so gain the most savings and monthly outgoing plus there is no end date to them unlike the loans which have an end date so more security for actually finishing as long as I keep paying0
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New_Guy_2016 wrote: »No I know no one judges on here mostly as like most I take full responsibility for my debts but want to find a way to get rid without trying to shirk my responsibilities.
Without going into an SOA currently after I pay my standard bills like food, petrol, phone, gas etc and then all the debts I listed above I have about £400 left over to last me the month. I am not putting anything to savings at the moment at my philosophy (which may be wrong) is better start chucking all my spare cash at the debts and then start saving. Plus I have quite a bit of equity in my house so even though not direct cash I am building a good nest egg there. So with the saving I get by paying off debts with the 13k it will add to this £400 initially. So my rough view was pay off the credit cards as do not have a contract end and the highest monthly payments so would then give me a lot more monthly (near 1k potentially) to start chucking at other debts.
However I am wondering if there is another viewpoint as you say like pay off the smallest first that may benefit in the long run. Without sounding stupid what is your reasoning for say paying off the smallest first?
The reason i say pay the smallest debt first is that you have a psychological boost, once you pay off the small debts and cross them out from your debt list they act as a mini achievement and spurrs people on to keep going
yes from a maths point of view, it makes sense to pay the highest debt first but we are human and we have emotions, so our mental/emotional state is very important if we are to be successful in paying your debts off
I follow the dave ramsey way of doing things but each to thier own if paying the highest debts first works for you then go for it
there is no right or wrong answer just our opinions
good luck“People are caught up in an egotistic artificial rat race to display a false image to society. We want the biggest house, fanciest car, and we don't mind paying the sky high mortgage to put up that show. We sacrifice our biggest assets our health and time, We feel happy when we see people look up to us and see how successful we are”
Rat Race0 -
The reason i say pay the smallest debt first is that you have a psychological boost, once you pay off the small debts and cross them out from your debt list they act as a mini achievement and spurrs people on to keep going
yes from a maths point of view, it makes sense to pay the highest debt first but we are human and we have emotions, so our mental/emotional state is very important if we are to be successful in paying your debts off
I follow the dave ramsey way of doing things but each to thier own if paying the highest debts first works for you then go for it
there is no right or wrong answer just our opinions
good luck
I did a mix, I paid all of the debts that were less than £500 as I wanted them gone, then I used the rest of my lump sum to tackle highest interest and then after two months was able to transfer the rest of the high interest debts to 0% cards which I think might have been to do with having less actual debts. But I'm just guessing. It was satisfying to clear 2k of small stupid catalogues etc and then i snowballedMoney money money.
Debt
Dec 2016: [STRIKE]£25,158.71[/STRIKE] £21,999.99
#28 Pay off debt in 2017 £3803.550 -
I get exactly what you are saying and agree it is not all about the maths as if everyone was that calculated then we would all not be in debt would we haha.
Yeah I am lucky in that the smallest debts in amount are also the ones which require me to pay them off and the highest interest. And yes it will pay off the most debts and just looking at my debts go from say 16 to possibly 6 or 7 will just feel like a big boost0 -
Yeah i think I am on the right page with paying small, high interest debts and getting rid of a lot quantity wise which are also the credit cards.
But like you have done I want to do the right thing that may unlock doors such being able to transfer other debt to 0% while pay off etc.
At the moment my main aim is to also get as much disposable each month to make a big dent into other debts every month.0
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