Which debt should I clear first?

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dipdap
dipdap Posts: 6,181 Forumite
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in Debt-free wannabe
I have extra money each month and I'm trying to work out which debt to focus on (I know you usually work on the highest interest rate first)

Credit card about £3,000
Currently on 0% bt rate which finishes in December, and will revert to normal rate of about 24.9%

Loan about £6,000
Currently on interest rate of 11.9% has a couple of years to run.


My loan allows for overpayments with no penalties.
I will probably have a spare £500 I can allocate towards one of these (guaranteed overtime until Christmas).

Please and thanx :)
Any help appreciated :)
Historic Debt August 2009 = £63,600 10th March 2017 = £0 100% paid all gone!
Mortgage started June 2015 = £170,000 January 2022 = £134,000
Saving for Xmas 2022= . . Amazon £55
If you focus on what you have left behind, you won't see what lies ahead - Gusteau
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  • retepetsir
    retepetsir Posts: 1,236 Forumite
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    Credit card!

    Try and clear as much of that as you can between now and December. Any option to get another 0% card to transfer the debt?

    The Great Declutter Challenge - £876 :)
  • chasingfreedom
    chasingfreedom Posts: 283 Forumite
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    I agree, blast the credit card while it's 0% interest.
  • dipdap
    dipdap Posts: 6,181 Forumite
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    retepetsir wrote: »
    Credit card!

    Try and clear as much of that as you can between now and December. Any option to get another 0% card to transfer the debt?
    chasingfreedom wrote: »
    I agree, blast the credit card while it's 0% interest.

    Thank you both for your replies :)
    I was thinking it might be the credit card, but the 'rules' say highest interest first so I got confused :o
    I have 2 credit cards I've just used to shuffle some debts around as they both had 0% offers on them, i just don't have enough room to move much more around. One of them has a 0% 6 month offer on constantly anyway, so I may transfer as much as there's space for from the card above in December.
    I won't be applying for any new cards as we're trying to move house and it would probably stuff up the mortgage process.
    Historic Debt August 2009 = £63,600 10th March 2017 = £0 100% paid all gone!
    Mortgage started June 2015 = £170,000 January 2022 = £134,000
    Saving for Xmas 2022= . . Amazon £55
    If you focus on what you have left behind, you won't see what lies ahead - Gusteau
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    If you have a card to move debt to on 0% whats the fee for moving it?
    if you need a bit more headroom you could ask for a limit increase and then close the other one in Dec once moved.

    The highest first does not work when there are promotional rate or the rates will change at some point you have top do a cashflow check.
  • dipdap
    dipdap Posts: 6,181 Forumite
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    getmore4less wrote: »
    If you have a card to move debt to on 0% whats the fee for moving it?
    if you need a bit more headroom you could ask for a limit increase and then close the other one in Dec once moved.

    The highest first does not work when there are promotional rate or the rates will change at some point you have top do a cashflow check.

    Fee is 3% and it usually offers me 0% for 6 months but they seem to keep sending me letters offering the 0% for 18 months.
    That card is currently up to its balance transfer limit, I hadn't thought about upping its limit, may have to look into that in the run up to December.
    Historic Debt August 2009 = £63,600 10th March 2017 = £0 100% paid all gone!
    Mortgage started June 2015 = £170,000 January 2022 = £134,000
    Saving for Xmas 2022= . . Amazon £55
    If you focus on what you have left behind, you won't see what lies ahead - Gusteau
  • National_Debtline
    National_Debtline Posts: 7,998 Organisation Representative
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    dipdap wrote: »
    I have extra money each month and I'm trying to work out which debt to focus on (I know you usually work on the highest interest rate first)

    Credit card about £3,000
    Currently on 0% bt rate which finishes in December, and will revert to normal rate of about 24.9%

    Loan about £6,000
    Currently on interest rate of 11.9% has a couple of years to run.


    My loan allows for overpayments with no penalties.
    I will probably have a spare £500 I can allocate towards one of these (guaranteed overtime until Christmas).

    Please and thanx :)
    Any help appreciated :)

    Hi dipdap

    Please bear in mind that with loans like yours, the interest is invariably "front-loaded" i.e. it is added on right at the start. That means while penalty-free overpayments may be allowed, you won't actually save anything by making them. So another vote for the card, I think!

    Regards

    Dennis
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
  • dipdap
    dipdap Posts: 6,181 Forumite
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    National_Debtline wrote: »
    Hi dipdap

    Please bear in mind that with loans like yours, the interest is invariably "front-loaded" i.e. it is added on right at the start. That means while penalty-free overpayments may be allowed, you won't actually save anything by making them. So another vote for the card, I think!

    Regards

    Dennis
    @natdebtline

    It's not, it's calculated monthly and appears on my statement (same way my mortgage works).
    Over payments on my loan, while they don't affect the monthly amount I pay, they are shortening the term, thus reducing the amount of interest added :)
    Historic Debt August 2009 = £63,600 10th March 2017 = £0 100% paid all gone!
    Mortgage started June 2015 = £170,000 January 2022 = £134,000
    Saving for Xmas 2022= . . Amazon £55
    If you focus on what you have left behind, you won't see what lies ahead - Gusteau
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    First Anniversary First Post Debt-free and Proud!
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    National_Debtline wrote: »
    Please bear in mind that with loans like yours, the interest is invariably "front-loaded" i.e. it is added on right at the start. That means while penalty-free overpayments may be allowed, you won't actually save anything by making them.

    That's not always true.

    Provident front load their doorstep loans but, if you clear them early, you will get some interest knocked off.
  • retepetsir
    retepetsir Posts: 1,236 Forumite
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    You want to clear as much from the credit card as possible (imo) before the 0% deal ends and the interest rockets to ~25%. It's only my opinion though.

    Could you post up an SOA? We can help with that.

    Also if you use the Snowball calculator you can see how different options work out regarding repayment.

    The Great Declutter Challenge - £876 :)
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    I thought fully from loaded loans got banned ages ago and they now have to over overpayment terms that "refund" interest and there is alimit on the penalty they can apply for terminating.
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