to save or pay off debts?

lulabelle

Have posted before, but not directly about this.

Am between £32-34,000 in debt - need to add up exact figures from recent statements.

Rough guide debt as follows:

£24,500 HSBC loan (7.9% - last payment in January 2010)
£2,600 HSBC Credit Card (0% until 10 Feb 2006)
£230 Natwest Credit Card (0% until Feb 2006)
£3300 Virgin Credit Card (0% until June 2006)
£1200 owing to parents for mortgage fees.

I normally pay off the following each month:

£493.61 HSBC loan (this is set and I cannot pay back earlier unless pay whole sum in one go)
£75.00 HSBC (minimum payment)
£85 (Natwest - over minimum)
£5 Virgin (minimum payment)
£100 parents (agreed)

Have managed to save £6500 recently in my flexi-saver account and aim is to get to £10,000 as "security" money - was unemployed for 2 months in 2004 and at same time had to put a 10k kitchen on my credit card and survive as not working.

I have somewhere between £1000-1200 per month spare after all expenses and spending money/food has been accounted for and am not sure whether it's better to re-pay the debt or save it.

I am really scared about being in the same position I was last year again and so want to have 10k as a back-up plan.

Am also likely to get about 1500 for xmas from my dad's racing winnings and my grandma who is trying to get rid of her money before the inevitable happens, I was going to chuck this at my credit cards but my boyfriend thinks I should save it.

Any advice would be greatly appreciated.

fairylights_2

I think someone will probably beat me to this - but you'll potentially be making less of your savings than you're paying for your debts! Sure whilst they're 0% you're fine, but perhaps you should clear those debts when they go back to normal APRs. Perhaps also pay off your parents so that debt isn't waiting for you?

10k just seems like a huge amount of security money to me - we as a household have about £15k a year - maybe you should just pay things off and then save again?

Your savings would cover almost all of your other debts excepting your loan - and would then free up another £265 a month to save - maybe then you could start saving up until you can pay off the loan?

Seems like you're doing well though - at least you're not trapped by lots of high APRs!

frugglewump

Well I would put it into savings until February, then pay off natwest. Paying off HSBC depends on whether or not you could shift it to another 0% card.

After that continue paying into savings until June and make the same decision then about paying off or finding another 0% card.

Excluding the HSBC loan the situation you have now is pretty much a set of stoozing cards - if you want to look for more 0% cards you will get better advice on that forum.

southernscouser

As long as your credit cards are on 0% put the savings into a high interest savings account. As and when interest starts to accure pay off that debt.

Alternatively you could apply for a new loan of £15,000 and use your £10,000 savings to pay off the remainder. The best rate I can find is 5.7%, which works out at repayments of £349.49 for 48 months.

However, you say that you have £1,000-£1,200 a month spare. That means you could pay that loan off in just 12 months! :j

In that 12 months you could probably have paid off all your other debt aswell!

Have a look at this calculator for a debt free date!