Which debt to tackle first?

dizzyblonde82

Hi,

I currently have 4 main debts as follows:

HSBC Loan £4350 - ?% - Mnthly pymnt £242 - 18mths left
Egg Loan £5670 - 13.9% - Mnthly pymnt £202 - 28mnths left
Asda C/C £2700 - 0% for nxt 12 months - Mnthly pymnt £80
Mint C/C £2200 - 0% for nxt 6 months - Mnthly pymnt £45

Originally I was going to use any extra income to pay off the credit cards first as the HSBC actually pays out 25% of the total interest paid at the end of the agreement and as I am over half way through the agreement it isn't worth paying off early.

After looking into the egg loan and using the calculator on the site I was shocked when it said that if I paid a one of payment of £150 I would save £51 in interest!

Having thought about it more I think that I would be better carrying on making just above minimum payments on the credit cards and putting any extra towards the egg loan (each additional payments only has to be £1 or more).

Through out the summer months we have more income as my husband is a kitchen manager and his hours go stupid over the summer months.

Is my idea logical or is there a better way of tackling this debt?

Tixy

Hi

Have you put all these figures into the snowball calculator?
If not I would do that first - although you do need to know the interest rate on the HSBC loan for it to be of real use.

How much in extra payments do you think you may be able to make in the next 6months? and the next 12months. What is the APR of mint after 6months? What does asda increase to?

Do any overpayments on the egg loan reduce the term of the loan or do they keep the term the same and reduce the repayment amount?

Little_Miss_Uni-Debt

Hi,

I love using the snowball calc and will work out some info for you. What's the most you can put you your debts each month?

What do your card interest rates go up to after the 0% interest free period?



Well done for investigating the cheapest route to being debt free! It is often just too easy to just keep paying the minimums!!

dizzyblonde82

Hi,

I can afford about £650 towards debt repayments at the moment.

Normal interest rates are as follows:

HSBC Loan - 15.9% - £425 due back from HSBC on date of last payment
Asda C/C - 19.7%
Mint C/C - 1.456 Monthly rate (cant find APR)

Overpayments on the egg loan reduce the term of the loan, monthly payment rate would stay the same.

RAS

Mint 17.4% ish

I suggest you snowball this lot.

But also consider whether saving money in the best interest account you can find and then paying off the card when the 0% ends might be an option? You would make a little interest on the savings but not be stuffed if you could not get a )% balance transfer. If you were able to do balance transfers, then put the savings to a loan.

Little_Miss_Uni-Debt

Hi there!

Here goes! I've had a look at the numbers and played around with the snowball calc.
Your Debt Free Date is :-
June 2012. It will take 26 months (Starting payments May 2010)
Total Current Debt - £14,926
Total Including Interest - £16,358
Interest - £1432

If you pay the money returned by your HSBC loan onto your cards you will be debt free within 2 years!!

As you are stuck to paying some high monthly costs on your loans this stops you from throwing lots more at your cards. As each debt is cleared this frees up more of your monthly cash and your balances drop quickly later on down the line.

As your cards are at a higher APR% than your egg loan, the following order is the cheapest way to pay your debts off.

1)HSBC (This will be naturally cleared first due to its fixed payment)
2)ASDA CC,
3)MINT CC,
4)EGG.

Payment Schedule

HSBC - £242 pcm until Oct 2011
ASDA - £161 pcm until Sept 2011 then 1 final payment of £1.36 in Oct 2011
Mint - £45 pcm until Sept 2011, then
Oct 2011 - £204.64
Nov 2011 - £448
Dec 2011 - £448
Jan 2011 - £448
Feb 2011 - £259.72 (Final Payment)
Egg - £202 pcm until Jan 2012 then
Feb 2012 - £390.28
Mar, April, May 2012 - £650
June 2012 - £106.27 (Final Payment) - Completely Debt Free!!!!

The snowball calc lays it out for you in a lovely table which is a little difficult to represent on here. If you want me to e-mail you a copy of your snowball send me a PM.

Just remember, every £650 you can earn extra, save etc is knocking 1 month of your debt free journey!!!

Good luck!!!

dizzyblonde82

Thanks for this, I have actually managed to move my loan onto a 0% card for 15 months so going to throw that money at other cards (obviously paying the min on the card as well) saved £700 in interest just by swapping it to 0%.