where best to start?

LouiseW_3

hi everyone,
i'm sure this is probably the same as a lot of others on here but havening recently finished uni i seem to have a lot of debt spread about and i'm not sure which to start paying first. although i am quite lucky in that none of it is particularly high interest. Basically i have about 6000 student loan, 7000 owing to parents for a car and 2 student overdrafts (interest free)1 at 1300 and another at about 1000. i have agreed a fixed amount over the next 4 yrs to pay my parents back but as my overdrafts reduce by 500 each per year i'm not sure if i should be paying these back quicker or paying toards my loan?

i have postponed all ideas of saving for a house for a couple of years as when i eventually qualify for my job in 18 months time will get a pay increase.

i'm just really after some ideas as to what to do first as i have written out budgets and numbers on endless bits of paper.

Thanks

Margaret_Millne

I would be surprised if the Student Loan Interest is higher than any of the others - it is a very cheap loan you are unlikely to get again so leave that until last.

Concentrate on the highest interest rate debt first, and pay all spare cash to that, paying only the minimum payments on the lower interest bearing debts.

As you clear the highest, move on to paying the next highest, and so on.

Debt_Free_Chick

Hi Louise

You need a very firm grip on exactly where you're spending money, so you can look for areas to cut back.

You need to start with a budget or Statement of Affairs (SOA) - there's a template on the Payplan site (link below). Click on Debt Calculator. The SOA sets out your income and all your expenditure - rent/mortgage, bills, food, travel etc. You also need to list your debts together with the terms, interest rate, minimum payments etc. Only then can you see what comes in and what needs to go out.

You could consider using a debt management company as they negotiate with your creditors so that you only pay what you can afford - even if this is less than what they want. In some cases they can even get the interest frozen. But DO NOT use one that consolidates your debts into a new loan and DO NOT use one that keeps some of your money as a "service charge".

The SOA is also useful in showing you where you're leaking money. Take food, as an example. Do you cook or get takeaways? If you cook, do you throw food out? If so, you might as well chuck the cash in the bin and cut out the middle man (supermarket) Do you go to Waitrose or Aldi/Netto. You'd be amazed at how much you can economise, once you see your SOA.

You'll need to identify essential spending and non-essential - and cut out the latter until you've paid off your debts.

So - get a coffee (or whatever), paper, pen, calculator and all your bank statements & other financial stuff. Do your SOA and have a look at these sites

http://www.payplan.com/

http://www.cccs.co.uk/

One thing that occurs to me is the car. Would not consider selling it and getting something cheaper, until you get back on your feet? I know you might not get £7k for it, but if you could replace it with one for £1500, the rest would at least pay off your 2 overdrafts and hopefully give some to your parents too.

nh

You should be able to defer payments to your student loan if you are earning less than £10,000.

If you are earning more than that you will have no choice but to pay it as it will be a fixed amount every month.

Ask the banks if they will give you an interest-free loan to pay off your overdrafts. Natwest offered me one as soon as I finished uni and it was a God-send, I would never have paid it off otherwise.

If your banks don't agree, go to Natwest and ask if they will give you the interest-free loan if you move all your accounts there.

The banks may not give out these loans any more, though, it is a while since I graduated. It is worth asking though, they may do it to get your business.

If that doesn't work: Does your overdraft continue to be interest free albeit reducing by £500 every year? If so, I would work out how much you need to pay off each month to make sure you get it under the new overdraft limit by the time it comes. If it is interest free, you do not need to worry too much as long as you get enough paid off each year to get under the new overdraft limit. If you can pay more off, then great.

Good advice on the car by DFC, maybe you could sell it? Maybe some income/outgoing figures might help people on this site see where you may save money?

Basically, you need to make sure you get the overdraft down before it starts charging you interest. Other than that, there is not much more you can do. Student loans are a very cheap way of borrowing. If you can defer payments, then do!

LouiseW_3

Thanks for all your advice. After a bit of maths i have decided to chage my mobile and have realised how much i actually spend!!

i should be able to pay off my overdrafts before they start adding interest.

SLC have started taking loan payments directly from my wages, although these are quite small and will at least pay back the interest each month.

i really need my car for my job as in the 5 months of having it i have done over 8000 miles. i can see it is expensive but i think for now the money i would lose by selling it straight away would leave me worse off. it is also in the ceapest insurance cat possibly so it is saving me in insurance premiums each year i have it.

I will start looking through the rest of the site to find out other ways i can cut back and try and make best use of my student discount card while i still can!!

Thanks again

LouiseW_3

hi
i've been reading a few other posts and have decided to update this one i made a while ago. when i first posted my debt was around £15,300 at the minute it is nearer £13,400. although i still consider this to be horrible i have realised that i can manage to pay it off. i have had a small pay rise at work and am currently still paying each month

£128 car
£30 direct from wages to student loans company

my overdraft allowances have been reduced to £1000 each however i'm well within this now and won't be using them again! as they are interest free any spare allowance i have at the end of each month gets paid into my ING account until i have enough to pay of the overdraft in full.

i have cancelled my mobile insurance as i decided  it was a waste of money (heard stories that unless you have mobile in your hand practically when it gets lost then you can't claim!!)

i am still trying to cut down text messages to reduce bill further. :-[

i have looked at all areas to save money but am still working on it. i will post income outgoings and see if anyone can help with other ways to save some pennies!

thanks again for all the good advice from everyone on here.
;D

ps still have my car and as expected i couldn't have got rid of it i have now done 15500 miles in 10 months!

nearlyrich

You seem to have made a good start on clearing your debts well done

Margaret_Millne

hi

my overdraft allowances have been reduced to £1000 each however i'm well within this now and won't be using them again! as they are interest free any spare allowance i have at the end of each month gets paid into my ING account until i have enough to pay of the overdraft in full.

Would you not be better paying some of your higher interest debt with any spare allowance, rather than putting it into ING? Just a thought.

LouiseW_3

i know what you mean but my highest interest debt is my student loan, i've managed to get everything else to 0%. when i originally posted it seemed the overwhelming response was to leave student loan til last so unless anyone thinks otherwise i had thought this the best way forward.

let me know what you think. thanks for the advice

Margaret_Millne

Sorry - hadn't fully understood. Money in ING will earn more than student loan interest, so you are doing the right thing, in my opinion unless anyone sees it differently.

DiggingOut

Well done, Louise, you seem to have a good handle on what you are doing.

Putting the money in ING also means it is available for the overdrafts when needed.