Help me spend my PPI refund sensibly!

Mister_aaa

Hi there,

Just wanted to check advice on what do in my situation.

Currently about to receive just over £7100 as a PPI refund, and unsure what to do.

Here is a breakdown of what im currently paying monthly towards my debts.

Car Loan - (this is where the PPI has come from) - £266 (reduced to £187 after PPI Payments removed) - balance outstanding £2100 (roughly 12 months remaining)
Barclaycard - £3690, fixed 6.9% life of balance, paying around £90 per month
Egg Card - £5200, (not sure of the interest rate, but its not low...) paying minimum payments for now (around £95), i plan to change this asap..
Mortgage - £5050 - Till 2012, £167 per month.
Overdraft - £2500

So, the options i have are

A) Pay off car loan, to get back £266 per month (this is what im used to paying), as well as paying off Barclaycard then balance transfer the Egg total to the Barclaycard to reduce the interest. Total £5790, leaves me with £1310, of which i promised to give £500 to my mother. This leaves me around £356 per month better off, with an £800 buffer for emergencies.

Pay off car loan and mortgage, £2100 + £5050 (£7150), leaving the credit cards alone. This makes me £433 per month better off, but paying the higher interest. Obvious the monthly savings would go towards my credit card payments.

Any ideas on which option would be the better one? Obviously the security of paying off the mortgage would be preferable, but im not sure i can afford to pay off both the house and the car loan - everything else is really tight, as im close to my max overdraft limit each month (£2500).

I'm thankful for this site in providing me with the option in the first place, as without it i would have been carrying on paying the full car loan & PPI! :money:

(Land_of)_Maz

somone will come along and tell you the best thing to do but i just wanted to say "whey hey hey!!! what a fabby position to be in!!!"

I would be tempted to clear car loan and Egg credit card, maybe ask for settlement figures to bump a bit off? This would leave one credit card, overdraft and the just let the mortgage to take care of itself with so little time left to run... but that's just my opinion having only read thru the options quickly.

mummum2

Can't offer any advice, but just wanted to say, great news on your reclaim of PPI. Whatever you do with it at least you'll be in less debt. Well done!

chunkytfg

Car loan, egg card and overdraft will have the highest intrest rates at a guess.

loan around 10% I'd have thought if a personal loan or maybe even above 20% is with someone like blackhorse finance.

If this is the case then the loan and egg card would be my first choice personally then use the extra monthly money to pay off overdraft. Then barclaycard then mortgage.

as each one is payed off i would then use 75% of the extra money to service the other debts quicker and the rest to actually enjoy life. Yes paying off debt should be a priority but IMO there is a point when you just have to say 'sod it' and go out for a meal or the piub or something and reagin some form of normality!

Mister_aaa

chunkytfg wrote: »

IMO there is a point when you just have to say 'sod it' and go out for a meal or the piub or something and reagin some form of normality!

I hear you!

The temptation is here to spend spend spend, but i really have to try to be a little more realistic about the situation i have got into by the spending bug in the first place!

I know what you all mean about the mortgage, as its only got a little time to run and its relatively small (i do also acknowledge that i am a lucky sob!) so i am inclined to just leave it, but having been made redundant 4 times in my life, im also looking at the security aspect of it.

What do you think about the option of paying off the barclaycard, then balance transferring the egg balance onto a life of balance, just to reduce the interest while i pay it off?

bank_of_slate

Well done on the PPI!

I would get rid of the car phone and overdraft first then take the next highest interest rate debt.
Save the rest and use the monthly income you've then freed up to clear the remaining low interest balance.

Are you still using a credit card?
ALSO..... Call them up and ask for a full & final settlement figure, it may even be less than the current outstanding balance
...Linda xx

Jesthar

Wahey, nice!

Definitely the higher interest debts first, so Egg and the car loan. You might want to check for early repayment penalties with the loan, though.

After that, I'd say once you give you mum the money leave the rest to reduce the overdraft (especially if interest is charged on that), then start throwing the cash which has been freed up at the overdraft and the remaining credit cards.

You could also be cheeky and ask Egg what they might accept as a full and final payment, see if you can get some money off the balance, but only if that wouldn't affect your credit rating (providing it's not shot already, anyway )

I'd also say the mortgage is small and has very little time to run, so whilst the security of having that paid off would be nice, it's not as important as paying off your higher interest rate debts. Although if you are allowed overpay on it, you might want to think about doing that with about £20 a month or something, as over a few months that will gove you enought o take a payment holiday if you need to.

Enjoy your debt reduction! :T

~Jes

Mister_aaa

I rang the mortgage company earlier today and asked for a final settlement figure, so will update the post when i get that.

The car loan is definitely going, as that is the largest outlay each month, which gives me more flexibility going forward.

I haven't yet got the money from the PPI reclaim, and i know that the difficult part will be resisting the temptation to spend...

I have to face up to the position i'm in though, and i've now started to look forward to being debt free, and i think that feeling will be so much better than any purchase

payless

I'm really surprsied that someone who must have worked hard to get mortgage that low has taken on debts which charge alot higher- but also agreed to a loan with a 40% uplift for insurance .. not saying it was a bad idea in taking insurance... but at that cost???

Mister_aaa

payless wrote: »

I'm really surprsied that someone who must have worked hard to get mortgage that low has taken on debts which charge alot higher- but also agreed to a loan with a 40% uplift for insurance .. not saying it was a bad idea in taking insurance... but at that cost???

Yep, i know. It was a combination of a rush of blood, combined with underhandedness from the loan company, hence the reclaiming.

I'm just glad i've started to seriously look at it all now.

(Land_of)_Maz

looks good in your sig too!!!