What would you do?

hieveryone

I have a few debts, and recently took out a finance agreement that is at a cost of £160 a month.

1. £1366 at 14.9% - pay £35.00 fixed per month
2. £1256 at 15.7% - pay £35.00 fixed per month
3. £1370 at 7.66% - pay £60.00 fixed per month
4. £375 at 7.92% - variable per month, usually around £20

It is not possible to switch any balances to any other cards, or between these existing cards/loans.

I have £2000 sitting in an ISA that I thought I would need but can be used to pay off some debt now.

What debt/s would you pay off first?

pania

hello fellow early morning person. firstly we need to know some more information, which debt is on credit cards and which on loans? your first target needs to be the highest interest rate ie 15.7%. you would be bst off using your isa money to pay this off, along with a chunk of the balance on the 14.6% debt (i'm guessing from the fixed repayment that this is a loan) leaving £622. if you are able to obtain a 0% balance transfer or low life of balance card then use this to pay off the remaining £622 so that all your debt is on a lower interest rate. if not then this £622 needs to be your target first as it will be costing you the most interest. Use the £35 saved from the 15.7 % debt and "snowball" this onto your repayment, so that you are paying £70 per month. Creditors are usually more than happy to accept overpayments, but if not then pop it into an untouchable savings acc and save until you have enough to pay it off. If you have any surplus in your budget to chuck at it then add that to the overpayment also. with some focus you could get this one gone in a few months!!
Hope that helps.
P

bottleofred

Hello hieveryone,

As Pania has already suggested, it's best to tackle the debts witht the highest interest rates first which will save you money in the long term. I realise if you use the £2000 from the ISA you won't be able to clear the 2 highest interest amounts, but it will reduce the cost and if you have a smaller balance to clear it should give you the incentive to get rid of the debt sooner, as well as having one less monthly payment. If you are not prepared to wait to get rid of the remainder of the high interest debt, then the 0% card option is definately worth investigating if you qualify. There are some incredible deals at the moment. I know it's good to have a fall back of cash, but the way interest rates are, you'll be saving money in the long term by using the cash from the ISA.

Good luck with whatever you decide to do