10k Debt - Best way to pay off

MFWannabe

Hi
Welcome to the board. It would probably be a good idea to take a break from pension; £150 is a lot that can put towards paying the Egg card. You need to post an soa so that we can look at all incomings and outgoings so we can see where you can make cutbacks to pay these off as soon as possible.

[Deleted User]

Ive already worked out that I can save myself about £300 a month by giving up smoking - long shot - and by making my own lunch each day rather than buying from the local shop. £150 if I make my own lunch, combined with pension break is step in the right direction.

andyd2604

no no no never never stop pension contributions, its a bit like overpay on mortgage, the benefits when you retire will be so much better. as for getting a loan for 24 months - ok but destroy all your cards too and [if you are very brave] cancel all your credit cards then there will be no temptation to spend. stick to your sallery income - mortgage and loan every month save for things you want rather than get it now on credit!

Oneday77

andyd2604 wrote: »

no no no never never stop pension contributions, its a bit like overpay on mortgage, the benefits when you retire will be so much better. as for getting a loan for 24 months - ok but destroy all your cards too and [if you are very brave] cancel all your credit cards then there will be no temptation to spend. stick to your sallery income - mortgage and loan every month save for things you want rather than get it now on credit!

I half agree. The pension payments need to continue, the longer and the more you have in from earlier on the more it's worth in the future.
Still avoid the consolidation though.

On £35k a year your take home will be roughly £2167pm less Pension assuming it's tax efficient so £2050 left. Break your expenditure down I am sure if you only have £10k of debt you will find a lot more cash than you think. The SOA posted here would get a lot more ideas where to make changes.

Your fortunate to not be desperate or in debt crisis so the pay off is up to how hard you want to work it.

Hannah_10

i think I would lower or pause the pension because I'd want to try to clear the cards and then after that I would have lots of money left to put extra into the pension then. To me it's a bit like savings, on the main site Martin Lewis says you shouldn't keep saving when you're in debt, you should use any savings to clear the debts first, as quick as possible, and save when you're debt free.

Oneday77

Hannah_10 wrote: »

i think I would lower or pause the pension because I'd want to try to clear the cards and then after that I would have lots of money left to put extra into the pension then. To me it's a bit like savings, on the main site Martin Lewis says you shouldn't keep saving when you're in debt, you should use any savings to clear the debts first, as quick as possible, and save when you're debt free.

Which is correct where savings are concerned. However a pension accumulates differently.
Consider this if you pay £150 into a pension and it is a salary sacrifice your net pay reduction is only £100 roughly but your pension gets £150 as you don't pay tax or NI on it.
So if you stop or pause the pension contributions, for every £100 you pay towards the loan it costs the pension an extra £50. In this case that means the earnings of the pension ie 50% tax saving out weighs the 20% interest on a credit card. This doesn't include the extra increase on the pension due to growth.
EG Stop pension for 12 months
£1200 paid to credit card save say £240 interest
Where as don't stop it and the pension gains £1800 a net increase of £360 extra for you.
Also creditors can't access your pension pot so it's safe savings so to speak.