Which debt should I pay first?

mrpotatohead

Ok, I'll try and keep it brief...

I'm a student, going in to my final year.

Current debts:

- £1,400 on Halifax credit card (0% offer runs out in October)
- £1,500 of my Natwest student account overdraft (£1,000 student loan will help reduce this next month)
- £440 First Direct overdraft (overdraft is 0% on first £250, 15.9% thereafter)

I receive £650 that I've been owed for a while this week, and as tempting as it is to spend it, I need to pay off some of this debt. I don't know what to pay off though first?

Should I pay the First Direct overdraft because part of that debt is being charged interest?


Thanks as always,


- Joe

blackclouds

Hi there

I am probably the last person to give advice given my current situation but I would say the debt with the highest interest is the way to go, although if £250 is interest free is there any reason to pay off more than the difference between £440 and £290? But then with the 0% on the c/c running out in October what will the interest rate revert to as I would imagine this will be quite high too

Sue-UU

blackclouds wrote: »

Hi there

I am probably the last person to give advice given my current situation but I would say the debt with the highest interest is the way to go, although if £250 is interest free is there any reason to pay off more than the difference between £440 and £290? But then with the 0% on the c/c running out in October what will the interest rate revert to as I would imagine this will be quite high too

You are the perfect person to be giving such advice blackclouds, after all you know exactly what it's like first hand. We're all in the same situation, but helping each other out where possible, it helps us feel good too. I agree with what you've said by the way!

Hi Joe. Good for you in taking the sensible step and asking, and you're right you do need to pay off some of that debt ASAP rather than spend any. I'd normally always go to pay off the highest first, but I think in your case I'd pay the First Direct and get it out of the way then get as much as possible off as soon as possible on the Halifax and keep clearing that ASAP.

Others may have different advice, we'll see. Good luck and keep your debts down and keep free from worrying!;)

Sue

piglet6

Blackclouds is right - you need to clear the debts with the highest interest, so first off has to be the part of the First Direct overdraft which is charging interest (like you suggested :T). If the rest of that overdraft is free, you can keep the balance in overdraft, but don't exceed that £250 limit!

You don't mention whether your NatWest student overdraft is free - if not, I would pay the remainder off that balance. If it is free, then I would put the remainder into a savings account to try and get a couple of months of interest while you are being charged no interest on any of your overdrafts, before the 0% Halifax car runs out in October - then pay as much as possible off the Halifax to avoid whatever interest rate they are reverting to...

Piglet

piglet6

P.S. Forgot to say, if the NatWest interest is higher than whatever the Halifax interest becomes in October when the 0% runs out, then you need to pay the NatWest off first - basically, stick to paying off the highest interest first every time!!

Piglet

isgman

Like everyone advice, Pay the Debt with the highest interest first, but do make sure you pay such things as Rent,Council Tax, Gas / Elec / Water any Secured loans and set aside the money for food 1st... Good Luck

mrpotatohead

Thanks guys for all of your advice and friendly responses... good to see that discussion of a topic that often feels so bleak, can be met with upbeat and positive support.

I'll go ahead and pay off the part of the First Direct account that is being charged interest, and then put the rest towards my Halifax One card.

- Joe