What to do! Help! Advice needed

scott_247

Its looking like i will be getting my bonus this year. :T
Its going to work out at £10,098 before Tax. After tax i am guessing at 40% its going to be £6058.
I have managed to get all my current credit card debt onto two cards, both of which are on a 0% interest offer. One is for 13 months, and the other has around 10 months remaining.
I also have a bank loan, that i pay £225 a month for.

Balances are as below:-
Bank loan - £3663 - £225 per month
Card 1 - £8600 - 13 months interest free. (Currently paying £200 fixed per month)
Card 2 - £9800 - 10 months interest free. (Currently paying £250 fixed per month)

My advice that i need is what to do with my bonus. I want to use it as wisely as possible.
Do i:
a) Pay of the bank loan and release £225 per month of extra cash. Then pay off the rest off of one of the cards. Approk £2k, then up the payments on my cards.
b) Pay £6k off of one card and keep the loan
c) Pay £3k of each card and keep the loan

Help! I dont know what to do for the best.

ScRiMpNsAvE_2

What's the penalty for paying off the loan early? What rate are you paying on it?

scott_247

Just rang them up and the penalty is 58 days of interest. The rate the loan is on is 9.2%

Not sure what that works out to? The lady i spoke to said that i would benefit from paying it all up as i will save on the interest. I have 17 payments left on the loan. Works out as (£3833.50)

ScRiMpNsAvE_2

In general terms the rule of thumb is to pay off the debt with the highest rate first, which in your situation would obviously be the loan. However any penalties should also be a consideration. Having never had a loan myself I'm not sure how the interest is calculated (i.e. whether its calculated and added on at the start of the loan or whether you'll only pay interest on the loan amount to the day).

If the former is the case then it looks like you will be paying an extra 2 months worth of interest. However it sounds like the latter is true, in which case I'd definitely clear the loan first - 2 months of interest is obviously a lot more appealing than having to pay the full 17 months worth.

Following that I'd pay the remainder off the card with the least amount of time left on the 0% deal.

Hopefully someone else on here will be able to clear things up for you.

Good luck

Any

scott_247 wrote: »

Just rang them up and the penalty is 58 days of interest. The rate the loan is on is 9.2%

Not sure what that works out to? The lady i spoke to said that i would benefit from paying it all up as i will save on the interest. I have 17 payments left on the loan. Works out as (£3833.50)

Ring them up again and ask them for "settlement figure" - ie how much do they want you to pay if you pay it off right now. That will give us more idea of how much in real terms is the fine going to be..

scott_247

Any wrote: »

Ring them up again and ask them for "settlement figure" - ie how much do they want you to pay if you pay it off right now. That will give us more idea of how much in real terms is the fine going to be..

The settlement figure of the loan is £3663 if paid by the 6th June.

Any

I personally would probably pay off the loan and then with the rest pay part of the card with 10 mths interest free left.
Then concentrate all (ie only minimum paym to 13mths card) free income to pay off the 10mths card...
Then do another balance transfer. Those cards usually allows 3 months for BT...
Transfer the few grand left on 10mths card, pay off minimum payments here and concentrate all the rest on 13mths deal to minimise it... then transfer that also to that new BT card (which will minimise BT fee because you paid off as much as you could).

Once you pay off this one you are debt free. Jupiiii

scott_247

OK. Sounds like a plan. So:
Pay off loan - £3663.36
Leaving approx £2337

Pay £2337 off of Card 2 (Egg) leaving a balance of £7549.
Increase payments to £400 per month for 10 months - £4000
Leaving balance of £3549 after 10 months.

Meanwhile, Pay minimum payments on Card 1 (MBNA) approx £200 per month. After 10 months will leave a balance of £6065.

So...after 10 months
No bank loan
Card 1 balance - £6065 (3 months 0% remaining)
Card 2 balance - £3549

Could then look at transferring both cards onto another new credit card fixed for a 0% period.
Sound right?

Any

Yes, the only thing I am saying that you are not - if you apply for BT card, you do one transfer immediately and one later on.. they keep the BT offer open usually for 3 mths. So you will still have 3 mths to pay off your Card 2, to get the balance lower and therefore pay lower transfer fee once you transfer...

scott_247

Any wrote: »

Yes, the only thing I am saying that you are not - if you apply for BT card, you do one transfer immediately and one later on.. they keep the BT offer open usually for 3 mths. So you will still have 3 mths to pay off your Card 2, to get the balance lower and therefore pay lower transfer fee once you transfer...

Ah!! I see what you are saying! Brilliant advice. Thanks very much!