Should I pay off debts first?

ybbon66

Hi,

I have recently Voluntarily Terminated my Audi Lease and bought a 2nd hand car outright. This saves me #500 pm which I was going to just push all onto paying off our creditors.

I noticed the mortgage free wannabe list which is a lovely idea. Just a quick poll really, should I just get on any pay off debts as soon as I can with this extra - it will still take time but a few years down the road hopefully they will be all gone and then just shove all that credit payment onto mortgage reduction - or is it worth even making something like #20 a month on the mortgage as a token "get rid of it quicker" gesture?

Currently we have a 3-year fixed rate (5.44% I think) that expires next March but can pay 10% overpay so we can pay onto that in the meantime. Debt wise, not sure off-hand, we have repayment agreements with 5 cards, biggest is 12K, smallest is about #300. I know I need to go through something like the snowball calculator to work out what order to pay them on, but just thinking it would be nice to start on paying the mortgage off too. Is it a good idea or better to just pay off the debts first?

Thanks,

N.

ybbon66

oh, sorry I do know what my credit card debts are, and they all have repayment agreements on that are being met, this #500pm is extra saved from terminating the car lease and was always intended to boost repayment to debts.

RAS

What are your APRs on the credit cards?

ybbon66

I'm not sure off-hand. I made my own arrangements as the DMP's were too restrictive (no pet insurance allowed for example) so that means that while we have repayment arrangements they are still charging interest and it will be more than the mortgage rate.

Our credit rating is pants anyway but I don't care about that right now, having thought some more on this I will get out the full amounts owed to credit cards, use a snowball calculator and then see the difference by spending some on a mortgage overspend. I suspect the better way is to use it to clear as much as possible off the one 0% card we have before that goes onto whatever the monthly rate will be in June - we won't have enough to clear it off but can make a dent in it at least before paying interest.

doodledo_2

Hard to say when we don't know the APRs and amounts etc but my instinct would be to throw it all at your debts and then move on to your mortgage once they are cleared

topbadger

Snowballing would definitely be the most productive use of your extra cash. Throw it all at the debt with the highest rate until it's gone, then start on the next highest. I understand the attraction of overpaying the mortgage, but if you're paying 2.25% on the mortgage (as I am – the joy of being on SVR!) and 30% on a credit card, it's a bit of a no-brainer, really. The mortgage can wait – as soon as all the expensive credit is gone, just think how much extra cash you'll have to throw at it, and you won't be wasting it on expensive interest payments!