Clearing debts

kubaroo
kubaroo Posts: 13 Forumite
in Debt-free wannabe
Hi guys. We are in situation when we've got debts and we struggle to repay. Decided that we get rid off most of it this year. I've started working more than usual, plan is to get £2000 every month, we should have £500 every month extra.
What u will do?
Will u go first and repay credit cards,store cards or overdrafts? Or we should start with biggest APR?

OVERDRAFTS - £4850
CREDIT CARDS - £7300
STORE CARDS - £2900

Comments

  • fatrab
    fatrab Posts: 1,231 Forumite
    Hi,


    The general rule of thumb is to pay the debt with the highest interest rate first. But that depends how much your overdraft is costing?


    Post an SOA and you'll get a lot of helpful advice, here's the link:
    http://www.stoozing.com/calculator/soa.php


    Best wishes
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

  • datlex
    datlex Posts: 2,239 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    Logic and clearing debt doesn't always go hand in hand. It is not always a good idea to clear off the one with the highest interest rate. To put it simply £100 at 50% = £150, £1000 at 20% = £200. If you are going via the interest rate go for the one that costs you the most. The other option is size of debt, so that you start with the smallest and then once paid off you add the payments to the next biggest. It really depends on what works for you.
    Paid off the last of my unsecured debts in 2016. Then saved up and bought a property. Current aim is to pay off my mortgage as early as possible. Currently over paying every month. Mortgage due to be paid off in 2036 hoping to get it paid off much earlier. Set up my own bespoke spreadsheet to manage my money.
  • fatrab
    fatrab Posts: 1,231 Forumite
    edited 15 February 2018 at 7:50PM
    datlex wrote: »
    To put it simply £100 at 50% = £150, £1000 at 20% = £200.
    No it doesn't. Your sums are wrong. 50% of £100 is £50, 20% of £1000 is £200. £1000 at 20% would be £1200.

    If you pay the debt off with the highest interest first you pay less in total at the end of the day.
    You can have results or excuses, but not both.
    Challenge - be 14 Stone BY XMAS!

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