How to clear my debt and which one first? please help

flyingguy

Hi everyone, I'll try and keep this simple;

My situation is as follows and most of the figures are approximate

Unsecured loan with alliance and Leicester (Santander )
£9k - repayment £290 p/m

Virgin CC - £3800 repaying £73 p/m on an arrangement with no interest or fees etc

Egg CC - £2700 repaying £34 p/m for a short period of time.

I own a car which is worth approximately £9k-£10k

I am prepared to sell my car, however I do need a car. I have spoken to Santander and they will only accept a full repayment of my loan and not a half payment etc to help reduce the monthly repayments. Therefore after selling the car I'd have no money left to buy a car Also, due to the arrangements and previous defaults with my creditors my credit rating is poor. I am earning £16500 per year so bring home about £1120 p/m. I'd appreciate any advice as to what to do as I need to reduce how much I am paying out each month and clear some debt.

Many thanks!!

talana

You say the Virgin CC is on an arrangement at the moment. What about the others?
Are they in arrears or also on an arrangement? What APR's are you paying on them?

You say you need a car, so you'll have to budget £1000-1500 I guess for a basic (but reasonably decent) runaround.
So sell your current car for £9000 and you'll have £7500 to pay off debts. That leaves you unable to settle the Santander loan immediately, so the other option is to pay off the 2 CC's, leaving you with £1000 lump sum + £107p/m to allow you some breathing space on the Santander loan.
But what are those APR's?

flyingguy

Thanks for your reply,

The APR on the Loan is 7.9%

The APR on the EGG card is 16.9%

The Loan is not on an arrangement, they wouldn't do it for more than 3 months, and the Egg card has a couple of months left on the agreement for £34 pm.

talana

flyingguy wrote: »

The APR on the Loan is 7.9%

The APR on the EGG card is 16.9%

Ok.
Well you don't have the option of settling the Santander loan at the moment anyway, but those APR's settle any debate.

Sell your car, pay off the 2 credit cards and don't spend any remainder. Put it towards the loan repayments.
If you're able to sell the car for more than £9K, so much the better.

flyingguy

That sounds about the right thing to do, the problem is for me is that the loan is what is costing me the most each month, whereas the CC's are costing me around £100 per month.

talana

Your monthly payments on the loan are more, but the Egg CC is twice as expensive (16.9% compared to 7.9%). Always pay off the more expensive debts first.

And the bottom line is you don't have the funds for paying off the loan now anyway, even if it is your preferred choice.