What do I do? Savings vs debt

wiggly

Hi all *waves* :beer:

I have a query that I can't really resolve

I have outstanding credit card debts (on a 0% card for another few months yet) and a loan *spits*

I've just sold some halifax shares (no don't get excited, I just never got round to selling the minimum before!) and now I have £2k of savings (these are the only savings I have in the world)

now, the £2k would wipe out my cards with not a great deal left over, which would result in me being able to pay the loan off faster too (as I could use the money I currently use paying my credit cards (about £250 a month - no penalty for early payment on the loan) which would mean I would be significantly better off when both were gone - but it also means I would have ZERO savings, nothing

can someone who can actually make decisions please help me here. I get the idea that theres no point having savings if you have debt, but the back of my head keeps saying "but it would be a fall back option"

any advice gratefully received

thanks - from a newbie

Snich

Hi,

My suggestion is as follows:

Work out APR on your loan...
Work out max interest on savings (5%) If APR bigger, then pay off loan. If APR significantly smaller (which I doubt), then save maybe 500pounds (for emergencies) and put rest towards debt - the one with the highest interest. That sounds like the loan BUT are you assured of continuing to get 0% credit cards? In which case, pay off credit cards.

How I would think of it is that if you pay off all your debt, you will have lots of money to then save up a HUGE pot of cash! However, I would always make sure you have a couple of hundred pounds for ABSOLUTE emergencies...

Hope that made sense.

Enjoy the feeling of the numbers going down.

Snich x

wiggly

the loan is way bigger than anything else so I won't be able to pay that off in one, the option is pay the cards off or keep hold of the savings *just in case*

although by paying off the cards would mean I could pay the loan off sooner (another 3 yrs otherwise) which would reduce the interest being paid

bloody hell this is confusing

I have nearly halved my debt in the last 18months though - just this last bit to sort out

all_hours

wiggly have you put the different scenarios through the snowball calculator

https://www.whatsthecost.com/snowball.aspx

This can show you how much less you will pay out for interest if you overpay.

all_hours

You could always keep a cc with a low limit of £500, but keep it in the drawer.

Peony

Pay the cards off. Put your newly 'spare' £250 into a savings account. Afer 4 months (really not that long) you will have £2K already. Keep saving the £250 until the savings match the balance on you loan and then pay it off early. This may be the only way of paying off early - with some loans you can make random extra payments, but with others you have to wait until you can clear the balance. If you can make a stream of extra payments then keep the first couple of month's savings stashed away and then pay off an extra £250 each month, saving more interest. If you keep the paid-off credit card somewhere (NOT in your wallet) then you could always use it in an absolute emergency anyway and then pay it off over the following couple of months. The sooner you ge it all paid off, the sooner you will have more flexibilty each month, and the minor things that go wrong in life (like boilers, cars etc) will be annoying but not financially catastrophic.

wiggly

*faints*

oh my lord, if I did get rid of the cards I could be debt free this time NEXT YEAR and not 2009 (by paying the cc payment onto the loan*

:eek:

all_hours

Then think how long would it take to save the 2k again? Not very long if you've got rid of all your debts.

wiggly

all_hours wrote:

Then think how long would it take to save the 2k again? Not very long if you've got rid of all your debts.

thats true enough aye

crikey charlie, thats so acheivable I'm a bit shocked!

Going to get all the paperwork together tonight and make sure I have the right figures for it

thanks everyone :beer: :j

Jaymz

I had exactly the same query a couple of weeks ago. I had 3k saved up and in the end decided to use 2k of it to pay off some of my loan. The interest on the loan was more than the interest on the savings.

wiggly

received the cheque last night from the shares and its clearing as I type

I'm a bit excited I have to say

thanks everyone