Best order to repay debt!!

clairemarie83

Hello!!

I am very new to this but feel quite pleased that the time has come for me to do something about the horrible debt myself and my partner have racked up.

As it stands we are in currently in debt to the amount of £9200.00. I have just got a new job which luckily gave me a 10k payrise and having cut back on many bills that were unnecessary we have about 750.00 a month to pay back off of our debt.

Here is the tricky part.....do I split this amount across the debts by 12 months in order to pay them off in a year or do I pay the highest interest debt first until it is cleared and then go on to the next one???

Your advice would be very much appreciated,

Kindest Regards

CM xx

Tixy

Well done on the payrise and the cutbacks.

Usually the advice is to pay the debt with the highest APR first to ensure that overall you pay the least amount of interest (known as snowballing on here).

The other alternative is sometimes people pay off a small balance on a credit card in the hope this might give them the possibility of getting a balance transfer deal to move another debt onto the cleared card at a low rate.

Also if you have a very low balance (that can be cleared within a month) sometimes people like to clear that first just to give themselves a mental boost.

Have a look here to see the difference each option would make in terms of the amount you will pay. http://www.whatsthecost.com/snowball.aspx

LeeSouthEast

Tixy's advice is right on the nail, as always!

Firstly, welcome to MSE. You're in a friendly place.

It does depend on 'you', in some respects. Do you want to pay the least interest possible, and pay off as quick as possible? Or do you want a 'quick win' at the cost of a few extra pounds overall, but to feel the "we're making progress" rush quicker?

If you're up for not paying a penny more than necessary, simply order your debts by APR, and attack the highest first and just pay the minimums on the rest until the highest is gone. Then attack the next highest, and so on until they're all gone. If you can, transfer to 0% where able to reduce the interest payments further (but cut up the old cards!).

If you want a quick thrill before you knuckle down, find the debt with the lowest balance (APR irrelevant), and pay it off. When that has gone, continue as above

Good luck! If you'd like advice on how to free up more cash from your budget for debt fighting, fill out and post an SOA (see the stickies at the top of the forum).