Bit of debt advice

toontastic

Hi all, been browsing round here for a while now but thought I'd make a post see if you clever gus and gals can give me some advice.

My debts currently stand at about £6,600 (maybe a little more, this does not include my student loan) which is basically my car and a credit card bill which I've been trying to pay off for ages but end up just tarting it around onto different cards (that comes in at £600 now).

I decided just before Xmas that I wanted to try and get rid of my debts and save up for one or two things.

Basically I'm wanting to get out of my parents house and get my own place. I currently earn £881.67 per month after tax and pensions and this will be going up a little bit in April but not totally sure how much by. My main outgoings are now as follows (I've been working hard to sort my debts out and I've already got rid of my £1,500 overdraft from Uni and my credit card bill was about £800 before) Right heres the comes the confusing bit

I've sorted my funds so that my outgoings are now less than my incomings I'm just not sure how to sort my money.

In my current account I currently have £340 which I'm shocked at cause I got paid a 2 weeks earlier than normal in December so I'm impressed I've still got money left.
My outgoings are
127.02 car loan
20.00 orange contract
10.99 monthly cinema pass
160 petrol
77 for my credit card

As you can see I've managed to wittle down my direct debits a fair bit and my kind parents mean I'm not currently paying any rent. I expect at the end of this month to have £200 left this is because it's my birthday today so I'll be going out on Saturday and I've limited myself to spending just £30.

Now along with my cash here I also have £500 in savings account with A+L (my interest has now gone down with these so I'll be changing no doubt) and I'm also paying £25 a month into a savings account with HSBC because I was already a customer which I think pays something like 6% + at the end of the year that it's been in there. It currently has £275 in there.

So the advice I'm after is should I pay off my credit card in one bulk or leave it as it is paying out £77 a month. I figured that by the time the 0% ends then I will have paid the card off. I don't spent anything on the card at all in fact it's in bits in the bin and I don't use any other credit card. I've so far not paid any insurance on my car as it was one years free insurance which will probably be £575-620 when I come to pay that (hoping to do it in one go). I then have the car service which I think is £75. My girlfriends birthday is also in February. So will it be worth paying off the credit and saving the £77 or should I just keep paying this.

I actually feel bad asking this seeing some of the problems people are going through with debit agencices so I hope you all dont mind me asking.

Thanks

Thefunkygibbons

If the card is at 0%, then no benefit to paying it off early

What is the deal on the car? How much time is left and waht is the APR%

It would probably be worth maximising the savings to see if you can clear that by saving a lump sum as most will not allow you just to overpay monthly.

Given how little you are spending, I would see whether you could save more by standing order so as to force yourself to live on the rest, it might help.

toontastic

The cars APR is about 6% I don't have the numbers to hand here though so I'd have to check the exact details, I think it's through British Gas if I remember correctly. It's a 5 year deal that's why I'd like that paid off quicker. I don't think I can pay more into each month which is a shame but like you say I'd like to put money aside to pay it off as a lump sum. However I then need to decide about the house, do I focus the savings to save up about 10% of a house (my current wage means I can only really afford a 51,000 mortgage) and just pay off the car for the next 5 years. I really would like my own house sooner rather than latter just not sure which option is best. It may even be a good idea to rent ?

Thanks for the advice.

exil

You're spending 30% of your post tax income on the car - even before tax, insurance and servicing - that's far too much. Your car basically owns you rather than the other way round.

Do you NEED the car eg to get to work? £290 a month would pay for 58 taxi fares at £5 each, or 200 bus fares at £1.50

£20 a month for the mobile phone - try pay as you go and cut down the number of calls you make.

£11 cinema pass - get rid of this and go to the movies less often

£77 on credit cards - seek advice on consolidating the debt. A bank loan of £6600 to clear all debts including the car could save you a lot - maybe £50 a month.

It's not easy - but £880 a month with no rent to pay shouldn't be impossible to live on.
Easy enough to give advice but harder to live by it!

JAMIEDODGER

def dont consolidate!!!!!!!

exil

Why do you say that? Interest rates on credit cards are horrendous, better to pay off with a loan at a lower interest rate.

toontastic

It does seem a little excessive there exil It takes me approx 30 minutes to get to work a day and a bit longer to get back, and the buses to get to work would mean leaving the house at about 5.30 in the morning and I don't really fancy that as it would take me about 2 hours, including 3 buses and a train Taxi would cost about £40 a day. The £20 a month is basically what I've got my phone down to from £60 which was a big cut for me. I now no longer phone at all I just text sending about 800 texts a month and the £20 a month gives me 3000 texts so I'll never go over that amount. Couldn't find a better deal for that.

I understand the reasoning behind not going to the pictures as much but I've basically given up going out and this is all I do now, my birthday is my first night out since New Year which for a young 20 year old I think is ok

The credit card of £77 a month is through choice to pay it off in a short space of time. Like I say the debt is about £600 on the card and I'm trying to pay it off in the time left at 0% I'm not paying min I'm paying a choosen amount, I was tempted to pay more but I thought since it was 0% why bother. What would consolidating the debt actually do, would it bring all the debts together and would it cut the APR ?

Thanks again for the help.

JAMIEDODGER

his credit card is at 0% interest at the moment, and his car loan 6% a consolidation loan would spread the cost of borrowing over a longer period of time.

his best bet is to pay minimum payment on 0% card and continue paying his car loan at the normal rate. stick all other money he can afford into a high rate interest account (i use ING) and then when 0% finishes pay it all off. (i think)

someone with better knowledge will be along in a mo to correct me!

skintchick

Takes longer to pay off might cost you more in the long run. THat's why.

toontastic

JAMIEDODGER wrote:

his credit card is at 0% interest at the moment, and his car loan 6% a consolidation loan would spread the cost of borrowing over a longer period of time.

his best bet is to pay minimum payment on 0% card and continue paying his car loan at the normal rate. stick all other money he can afford into a high rate interest account (i use ING) and then when 0% finishes pay it all off. (i think)

someone with better knowledge will be along in a mo to correct me!

Ah right never thought of doing it that way, so is it not worth my while just paying off this card since I have the fund available to do so really ? I may have failed to mention that since I am a gradute student I have a £1250 interest free overdraft. I'm not using it a all at the minute like I say I'm currently £340 in the black and come next Tuesday when I get paid again I should still be £200 in the black giving me 1082.37 come February. If I took off my usual spendings in February and paid off my CC then I would have £136.38 of which some of that could go on my g/f and the rest (if any depends on my kindness ) could go to savings. Or would this not help ?

JAMIEDODGER

personally... and it is only personally. i would pay min payment to cc....when does 0% run out?

draw out the 1250 from graduate account (is this a set time limit?) and put it along with any other savings into ISA or ING for example.

when 0% ends...pay off credit card.

keep putting as much as you can afford each month in savings each month.

when your car ins etc comes up for renewal. pay in full from your savings account.

meanwhile keep paying the car loan at its normal amount.

your outgoings are quite small (good on your parents!!) so i think there is nothing wrong with a cinema pass you are entitled to some fun time!!!

it would probably help if you could list your monthly spends so you could do a budget like this:


income: 880

128 car loan
20 orange contract
11 monthly cinema pass
160 petrol
35 (rough guess) for my credit card

leaves 526. divide it between x amount monthly spend and x amount savings (set up on standing order to save being tempted!!)

hope this helps

JD xx