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  • FIRST POST
    • New_Guy_2016
    • By New_Guy_2016 26th Dec 16, 9:31 AM
    • 107Posts
    • 25Thanks
    New_Guy_2016
    Which Debts to pay
    • #1
    • 26th Dec 16, 9:31 AM
    Which Debts to pay 26th Dec 16 at 9:31 AM
    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
Page 2
    • FatVonD
    • By FatVonD 27th Dec 16, 11:40 PM
    • 5,000 Posts
    • 19,843 Thanks
    FatVonD
    If you are hoping to move everything to 0% then bear in mind that once you clear a card (especially if you have never defaulted) you are likely to be offered a 0% deal so don't close the first ones you pay off as you can then transfer some of the others over (and then close those ones instead or repeat until it's all on 0%.)

    With this in mind you need to think about which CCs are all part of the same 'group' as some won't let you transfer a balance from another of their own cards so maybe bear this in mind also when you are deciding which ones to pay off first and leave yourself with a broad mix.
    • New_Guy_2016
    • By New_Guy_2016 7th Jan 17, 1:45 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Right so I have done a recheck on what is better to pay off after getting all the Interest rates for each card but can anyone tell me if I am correct in my calculations.

    Basically to give me a max minimum monthly payment workout I have done FULL BALANCE * MONTHLY PURCHASE INTEREST RATE + £5 to get minimum payment. I have guessed at the £5 add on as not sure how credit cards work out what extra you pay on top of interest.

    So as an example my highest interest card is my Vanquis at 3.43% and the balance is 2k. So I worked out my interest a month if at maximum spend would be roughly £67 and then added £5 so a monthly payment of £72
    • abby1234519
    • By abby1234519 7th Jan 17, 4:21 PM
    • 1,897 Posts
    • 3,030 Thanks
    abby1234519
    Right so I have done a recheck on what is better to pay off after getting all the Interest rates for each card but can anyone tell me if I am correct in my calculations.

    Basically to give me a max minimum monthly payment workout I have done FULL BALANCE * MONTHLY PURCHASE INTEREST RATE + £5 to get minimum payment. I have guessed at the £5 add on as not sure how credit cards work out what extra you pay on top of interest.

    So as an example my highest interest card is my Vanquis at 3.43% and the balance is 2k. So I worked out my interest a month if at maximum spend would be roughly £67 and then added £5 so a monthly payment of £72
    Originally posted by New_Guy_2016
    If you plugged all the balances and interest rates and min payments into whatsthecost.com (find the snowball calculator) it would work it out for you and you wouldn't need to worry about the mathematics.

    I know you keep saying that the dfs loan is a fixed term blah blah. but if the snowball calculator says you will save money by clearing that first then just follow it's instructions.

    I live by the snowball calculator. It's easy enough to get all your interest rates and min payments.
    Money money money.

    Debt
    Dec 2016: £25,158.71 £21,999.99

    #28 Pay off debt in 2017 £3803.55
    • New_Guy_2016
    • By New_Guy_2016 7th Jan 17, 4:28 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    Okay thanks, will try that.

    I get what you are saying and agree I may consider if it says paying off the DFS is better in the long run.

    My thought at the moment though is things like the DFS are essentially out of my hands and taken care of in terms of when it ends and I just have to keep paying as I have done. But the credit cards will stay as they are unless I make a conscious decision to pay off and not use again. In theory it is easy but in practice a lot harder so trying to remove as much risk as possible
    • abby1234519
    • By abby1234519 7th Jan 17, 4:35 PM
    • 1,897 Posts
    • 3,030 Thanks
    abby1234519
    Okay thanks, will try that.

    I get what you are saying and agree I may consider if it says paying off the DFS is better in the long run.

    My thought at the moment though is things like the DFS are essentially out of my hands and taken care of in terms of when it ends and I just have to keep paying as I have done. But the credit cards will stay as they are unless I make a conscious decision to pay off and not use again. In theory it is easy but in practice a lot harder so trying to remove as much risk as possible
    Originally posted by New_Guy_2016
    I get what you mean about DFS don't worry.

    What is most important to you. Saving interest so you pay less overall towards your debt? Or having less debts (as in 4 debts v 10 debts). If you pay off your credit cards, you would need to cut the vanquis ones up (bad bad vanquis) and close them so you don't fall into the trap again
    Money money money.

    Debt
    Dec 2016: £25,158.71 £21,999.99

    #28 Pay off debt in 2017 £3803.55
    • New_Guy_2016
    • By New_Guy_2016 7th Jan 17, 4:51 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    I think in order of priority for me taking into account the amount to pay off is already set at around 13k has to be

    1. Pay off as many Credit Cards as possible
    2. Start with the smaller amounts and work up to maximize the quantity
    3. Save as much monthly as possible

    But looking at my Debts and the amount of Credit Cards it is pretty simple to meet all that criteria
    • New_Guy_2016
    • By New_Guy_2016 14th Jan 17, 1:34 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    Sorry for all the questions but just want to make sure this money is working for me as much as possible.

    An alternative to paying off the Credit Cards is today I have got a statement from my 2nd Mortgage which states to settle the amount now I would need to pay £16,000. Now i have looked at the possibility of being able to add to my lump sum payment I am getting which would allow me to pay this off. Initially it would be less savings a month and quantity wise would be less debts paid off by a long shot.

    However as well as short terms fixes I am trying to make sure this works out in the long run. So I know extra borrowing is not recommended but if we say paid off the 2nd Mortgage which is a high Interest rate could we have options of:

    - Better chance at getting a re-mortgage to a lower rate not we have a good bit of equity in the house
    - Qualifying for a Loan on a much lower interest rate than the Credit Cards and using this money to pay off the credit cards

    Alternatively if we paid off the Credit Cards with the lump sum would we be in a better situation maybe to qualify for a low interest loan to pay off the 2nd Mortgage.

    As said I know borrowing more does not help as you are in essence getting debt to pay off debt but we are at the point now where we want to make sure this money works for short term and long term
    • theoretica
    • By theoretica 14th Jan 17, 2:31 PM
    • 4,948 Posts
    • 6,190 Thanks
    theoretica
    We don't have all your interest rates to look at, but I think it unlikely that paying off the mortgage first would be the best choice for you. Pay the high interest cards and catalogues first, then use the extra freed up to pay other debts.

    Do check the terms on your Very account - they can be eyewateringly high interest rates.
    But a banker, engaged at enormous expense,
    Had the whole of their cash in his care.
    Lewis Carroll
    • New_Guy_2016
    • By New_Guy_2016 14th Jan 17, 4:04 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    Cheers,

    Yeah I have done all the Interest rates and most of the Credit Cards are the high Interest ones. but yes as I am initially thinking of paying the small debts off I will have a look at the Very Account.

    The only other high Interest thing I have is the 2nd Mortgage but would take my whole lump sum to pay this off so only 1 debt paid as opposed to several Credit Cards.

    I know you cannot predict but wanting to make sure the money goes exactly to the right things so it benefits me in a much ways as possible in the future
    • New_Guy_2016
    • By New_Guy_2016 20th Jan 17, 7:43 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    Okay so I have on the off chance emailed all my Credit Cards advising them I may be coming into a lump some of money and wondered if they would accept a partial settlement of the amount I owe them.

    I have received an email back about both Vanquis card which are 2k limit each. They advised they would take a partial settlement on each of just over 1,700 but would have to mark the Credit files as partial settlement which is understandable.

    In terms of savings this is nearly £600 which I could put to another debt, however I am not sure what the downside of having a partial settlement on my Credit File. I mean at the moment with all the debt we have and issues in the past our Credit files are bad anyway but not sure what this will do to our credit file in the short time and long time.
    • fatbelly
    • By fatbelly 21st Jan 17, 8:33 AM
    • 11,649 Posts
    • 8,782 Thanks
    fatbelly
    I'm surprised that V are offering F&F without a default.

    As they are high interest anyway, take the offer.
    • New_Guy_2016
    • By New_Guy_2016 21st Jan 17, 9:43 AM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    Yeah they seemed quite understanding but said only partial settlement and nothing about a default but will check.

    Will it not be an issue say having potentially 2 entries on our Credit files that say Partial Settlement though
    • fatbelly
    • By fatbelly 21st Jan 17, 9:52 AM
    • 11,649 Posts
    • 8,782 Thanks
    fatbelly
    It'll have an effect, but I don't think a major one - you said your credit history is already not good.

    You need to focus on getting debt-free (note name of board) so this is a good step.
    • New_Guy_2016
    • By New_Guy_2016 21st Jan 17, 9:56 AM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    Thank You,

    Yes I agree, presume it would be different if my Credit Score was good but with the bad stuff on there as you say a partial settlement entry wont make much difference.

    Just checking with it being partial I presume it falls off as normal after 6 years and they cannot chase me in the meantime for the rest of the payment after they have accepted partial settlement and I have paid it
    • fatbelly
    • By fatbelly 21st Jan 17, 11:39 AM
    • 11,649 Posts
    • 8,782 Thanks
    fatbelly
    Thank You,

    Yes I agree, presume it would be different if my Credit Score was good but with the bad stuff on there as you say a partial settlement entry wont make much difference.

    Just checking with it being partial I presume it falls off as normal after 6 years and they cannot chase me in the meantime for the rest of the payment after they have accepted partial settlement and I have paid it
    Originally posted by New_Guy_2016
    That's right - entries fall off 6 years after they are defaulted or settled, whichever happens first - partially or fully settled makes no difference.

    Their written confirmation of the deal should state clearly that the balance will be written to zero and you not be pursued for the rest.
    • sourcrates
    • By sourcrates 21st Jan 17, 12:08 PM
    • 12,714 Posts
    • 12,051 Thanks
    sourcrates
    Their written confirmation of the deal should state clearly that the balance will be written to zero and you not be pursued for the rest.
    Originally posted by fatbelly
    OP,

    This is essential, you must have acceptance of the deal in writing.

    One poster this week was been chased for the remainder of a debt he paid off, even though he had there initial acceptance in writing.

    There are no ethics in the debt collection business.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File And Ratings, and
    Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".
    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views are mine and not the official line of MoneySavingExpert.com.

    For free debt advice, contact either : Stepchange, National Debtline, or, CAB.
    For Legal advice see : http://legalbeagles.info/
    • New_Guy_2016
    • By New_Guy_2016 21st Jan 17, 2:32 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    No I agree and know all too well about getting things in writing with the line of work I am in.

    I just wanted to make sure what a partial settlement would do as at th moment we would be saving nearly £500 with the partial settlements vs the partial settlements being on our Credit Files.

    I have emailed all our other Credit Cards to see what they say so depending on the savings(which would go to paying off or making a good dent in more debts) compared to the amount of partial settlements that would be registered against our file would decide what we do
    • New_Guy_2016
    • By New_Guy_2016 25th Jan 17, 7:35 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Debts
    Okay just to keep the post updated as want to make sure people better experienced than me can chip in what I am doing is wrong.

    I have now as said before heard back from my Vanquis card which has a Limit of 2k and is full spent. They have offered me a partial settlement £1762 and lower payments for the next 2 months until I settle in March. The downside is they will mark my Credit Report as Partially settled.

    Today i also heard back from my wifes Vanquis which is 2k and at the limit. They have however offered a partial settlement of £862 so a massive reduction and again the only downside being the mark on the credit file. The slight difference with this is it is only valid for 17 days and I cannot make a lump payment until March. They have said the settlement figure would change but at the very least this looks like some sort of discount will be applied for a March partial settlement.

    This currently means that potentially the money saved on both could pay off one of my other debts with DFS or the MBNA being the smaller debts. The other option is to pay it into our Evolution 2nd mortgage which could then bring the date for completing that loan come forward.
    • New_Guy_2016
    • By New_Guy_2016 13th Mar 17, 9:07 PM
    • 107 Posts
    • 25 Thanks
    New_Guy_2016
    Okay so it is only a week away before I have the lump sum payment from work in order to pay some debts off.

    Just to confirm this is my plan but want to make sure I am not missing a trick:

    Payoff

    Capital One - Balance -£2,550.00 Monthly Saving -£83
    Capital One 2 - Balance - £200.00 Monthly Saving - £7.00
    Barclaycard - Balance - £1,200.00 Monthly Saving - £44.00
    Vanquis - Balance - £2,000.00 Monthly Saving - £98.00
    Aqua - Balance - £1,600.00 Monthly Saving - £80.00
    Vanquis - Balance - £2,000.00 Monthly Saving - £50.00
    MBNA Credit Card - Balance - £1,500.00 Monthly Saving - £50.00
    Tesco Credit Card - Balance - £250.00 Monthly Saving - £10.00
    Dorothy Perkins store Card - Balance - £250.00 Monthly Saving - £10.00
    Parents Loan £7,582.00 £223.00 - Paying £1,561 off so have 7 months without the payment

    Not Paying Off

    Very Catalogue £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
    Barclay 2 £1,200.00 £65.00
    IHG Credit Card £5,000.00 £143.00
    • enthusiasticsaver
    • By enthusiasticsaver 13th Mar 17, 11:39 PM
    • 4,856 Posts
    • 9,176 Thanks
    enthusiasticsaver
    It is very difficult to give accurate advice without the interest rates charged by each debt - the apr. Can you not edit to show this for each debt? For example I am assuming your parents loan is 0% but you are making 7 payments upfront presumably so you can direct the £223 to another debt.

    I can see the logic behind you paying off the debts with no fixed repayment term and leaving the loans to run their course but without knowing the rates you are being charged it is impossible to say definitively this is the best use of your lump sum.
    1 week to go until early retirement. Debt free and mortgage free.

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
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