Debt Management advice please

TerryB_3

Hi All

I had my light bulb moment a few days ago after getting a bill in the post for £3,700.

Here are our debts:
Egg 13,500 0% min payment (260 pcm)
Loan 3,500 13% min payment (290 pcm)
Overdraft 1,500 14.8%
Repair bill 3,700 0% min payment (150 pcm)
We have £4,000 with ING earning 4.5%

My wifes income has become a little unreliable due to family illness, and we're keeping the option open that she may need to give up work altogether for an extended period (e.g. 6 months).
I pay all the household bills, but she pays the loan repayment. The Egg repayment comes out of the ING account.

Currently we need £440 a month to service our debt. I am considering the following:
Pay loan with ING money.
Consolidating the remaining debt onto our mortgage at 4.84%, keep £3,000 back as emergency funds, and make £460 in overpayments to the mortgage. We should be able to put more money in most months. Snowball tells me that the £460, after 12 months, will pay off our mortgage by £9,000, but I expect us to be able to pay £600 (reduces by £12k).

At first glance, this may not make sense as I'm moving from 0% to 4.84%, but the idea is that if we lose my wifes income, we can reduce our outgoings, and the mortgage is still quite managable.

I reasonably confident that we won't rack up more debt for day-to-day living, so I don't think we'll borrow more money once the debts out of the way. 90% of our debt is not due to us overspending.

I'm reluctant to post our SOA, as I've recommended this site (and board) to so many people, they may be on here

I'm very open to any other ideas or suggestions. Thanks in advance.

Kevicho

Hi terry

If you want post an SOA under a different username, but the people on here are not here to judge anyways

We will be able to help much more if we have all the information, but from reading your post i can see where you are coming from, however i think if you are going down that road it may be better to leave the loan till you get a more definate answer with regards the wifes job status

All the best

Kev

TerryB_3

The wife's situation is due to family illness. It may not affect her work for maybe six months, but it will happen at some point. Unfortunately, we just don't know when.

mattp_3

hiya

just a quick point, i'd recommend you use some of your £4k savings to settle the higher interest rate debts?? Seems pointless to have savings earning 4.5% when debts are accruing 13.8%? I'd keep some in reserve for emergencie,s though?

Cheers
Matt

TerryB_3

Thanks for your thoughts.

My pay covers the overdraft for about 50% of the time so I'm paying £8-£9 interest a month.

I agree about the loan, and the idea is to pay off the loan with the ING saving. Although I don't like the idea of only having £500 held back. It's a fixed loan, so it's all or nothing.

david_hellier

I would tend not to overpay your mortgage until you have cleared some of your more expensive debts. Clear that loan and get your overdraft off the floor first. When the Egg offer ends, start using the extra money destined for the mortgage for that (£450). It also goes without saying that you should stop using credit cards for any more purchases as they only reduce your spending power.