Which do we repay first?

howlets

My husband recently defaulted on his loan with HSBC and, as a result, we have managed to come to an agreement with them whereby he will pay off his outstanding balance in set monthly amounts (without the involvement of the courts). The interest has been frozen. He is due a large compensation payment following a car accident and we originally had the intention of paying off the HSBC loan in full with this money...however, I don't know whether this is the best thing to do as he is no longer paying interest on it...he has nother loan with Halifax (which has no problems and is being paid off monthly, however, does attract interest) - should he use the money to pay off the Halifax loan or the HSBC one? I don't know which option will have the best overall benefit - help! Thanks.

kindofagilr

I would say the Halifax as you are paying interest on it.

Then if you wanted to you could use the extra money (the money you would have been paying Halifax) to up the payments of the HSBC one making you debt free (if you dont have anything else) a lot sooner?

Or if you have other debts, still pay off the Halifax one then pay off other debts with the money you normally pay the loan with.

This is of course just my opinion though

CLAPTON

financially it makes sense to pay off the loan that's charging you interest

I would think carefully about upping the HSBC monthly payments as they may see this as a sign that your finances are now OK and restart interest.

Rafter

It really depends whether you think you will be able to repay the HSBC loan in due course.

If you did need the help of the courts in future, they would find it odd that you have treated Halifax preferentially to HSBC.

HSBC might spot it through your credit record and might also insist that you add the payment you were making to Halifax is now made to them too.

As a matter of interest, have any of your debts been 'sold on'? That is, they are now being collected by other companies? If so, you might be able to make a 'settlement offer' using the insurance money to clear the debt at a reduced level.

Good luck

R.

howlets

Thanks Rafter.

It's now being collected by Metropolitan Collection Services (which I believe are still part of HSBC)..so that's a good idea. The majority of the outstanding amount is interest and admin charges anyway, which we intend to contest once it has all been repaid...so I think the settlement offer is the way to go.