Hi Everyone, a little advice please.

LECOL

I am taking vol redudancy from my workplace and am receiving a payout that in total would clear my current debts. Obviously, until I find another job I won't be able to clear all of it in one swoop. I would like to pay some of my debts off but have no idea what route to take.

At the moment I have a loan that will be paid off in 2011, currently paying £287 a month, totals £8000. APR 7.9%

I have 3 credit cards that I am currently paying the minimum on:

1. £2300 - 19.9%
2. £1250 - 9%
3. £400 - 9%

What would be the best debt to pay off first? The cards or the loan?

Your help would be greatly appreciated.

Youdontseeme

I would think paying your credit cards off 1st would make sense, as you are paying higher interest on these. So the one at 19.9% would be the obvious choice (in my very limited opinion, only been here a week cant really believe I am offering advice!) to pay first, then the next one down in order of interest. I "think" the best thing to do would be to throw as much as you can at your cards and if there is any balance left outstanding on them move it to the credit card with the lowest rate?

I am sure someone else will be along soon to either confirm this or tell you I am talking tosh!

talana

As the last poster rightly says, pay off the most expensive debt first.
So the 19.9% card card first, followed by the other two cards if funds allow.
The loan should be last of all.

BenL

yeah clear the cards off. It also gives you the benefit if you do struggle to get a new job of borrowing back again for purchases.

Dabooka

What CCs have you got that are 9%, that's a good deal.

LECOL

Thanks people,

I forgot to mention that I can only pay my loan off for the full amount, obviously this has the highest monthly payment, would you still advise to pay off the CC's?

I was thinking of paying the loan off, and if I get another job soon I'll then be able to use the rest of the money to pay the CC's, as until then I can pay the minimum?

onlypaddy

LECOL wrote: »

Thanks people,

I forgot to mention that I can only pay my loan off for the full amount, obviously this has the highest monthly payment, would you still advise to pay off the CC's?

I was thinking of paying the loan off, and if I get another job soon I'll then be able to use the rest of the money to pay the CC's, as until then I can pay the minimum?

noble sentiment, but as people have already pointed out you will end up paying more interest on the cards then. plus, if it takes you a while to find a new job you have the last ditch backup of the cards to fall back onto (starting with the lowest interest one first).

you mention making minimum payments on credit cards - bad, bad mistake! have a search on the site for the guide on minimum credit card repayments. theres a calculator on there i had a play with and in my worst case scenario with a debt smaller than your card and paying the minimum it would take me an extra 62 years to pay it off than if i paid more than the minimum :eek:

RAS

Hi

You need to pay off the highest APR debts first as a rule. See the snowball on www.whatsthecost.com.

Bear in mind that if you clear a card, you may be able to pay off part of the loan onto an even lower rate deal but this may not be worth it if there is a substantial fee.

gfplux

Pay of the C/C first. Then use the rest of the cash to keep up to date with the loan repayment.
Make a plan.
I would suggest you "think" it will take 9 months to get your next pay check.
Work out 9 months loan payments = £2583.
Then divide the rest of the cash by 9. That plus job seekers is the budget you have to live on each month.
Does that make sense??