What's the best way to clear this...?

lollyhop

Hi,

I'm in a bit of a quandry about what to do with my debts. Basically I have 2 'bad' debts from when i was 18/19. 1 Is with Halifax (who I have my current account with) and is now, 10 years later, £3998. Another is with Egg and is £2228. My other debt is a loan that my boyfriend took out to pay for my car, he owes £5270 on my behalf.

I have had agreements for the past 8 years on the two bad debts whereby the interest was frozen and I pay a set amount each month. The payments started at £5 and are now £70 each.

I pay the loan that my boyfrined got for me at £170 a month.

So my total debt is £11,496. I pay £310 a month.

My situation has changed recently and I have an extra £400 a month wages. I have a comfortable lifestyle and am detiremined to clear my debts asap so I want to use this £400 to do this.

My plan in to put it in to a savings account every month and then pay all the debts off at the end on 2011.

So, my question is... Am I right in thinking this is the best way to do it because I will be able to offer a settlement on the debts at maybe a 25% reduction? If o it is surely beeter to save the money up and pay of in one go rather than spread the £400 across the loans each month..?

Also, although my heart tells me the priority should be to pay my boyfriends debt off... is that foolish when I should really pay the Halifax debt off first in order to stop the worry of them taking money from my current account? How likely is it they would ever do that?

As an aside... why is the Egg debt not on my Experian report?

Many thanks if youve got this far!

sofababe

Firstly, move your current account. I don't want to scare you and it probably won't happen but it can, and it does. Also if Halifax see an extra £400 a month going in they may ask for more per month.

You're probably right about the F&F offers, after 8 years you stand a good chance of getting accepted.
You and your boyfriend need to check the T&Cs for the loan as there may be penalties to paying it off early, or overpaying. Was the interest for the loan added up front or is it added monthly?

Well done for getting this sorted and making good use of your extra income. In a year or so you'll be in a great position and even if you let the car loan run it'll be gone in 2 and 1/2 years

The Egg debt may not show if its too old. Defaults drop off your report after 6 years, so it may have come and gone before you got your report.

MFWannabe

You need to set up a current account with another bank and get your wages paid into your new one then Halifax can't just take your money. Just get a Basic Account so there's no overdraft facility.
With reference to your extra £400 per month, are you definitely sure you'll save it and not be tempted to spend it? If you can definitely save it then yes put it away and make settlement offers when ready. Maybe save it into an account where it's 'locked' away for 12 months?

lollyhop

Thank you that is so kind of you to reply. The debt that my boyfriend got for me had the interest added upfront, it is a Zopa loan. There is no penalty for paying early but obviously there is no benefit in terms of the interest.

Ive just looked around the site and yes it seems that egg isnt on there because the default was over 6 years ago. But that makes me wonder why the Halifax debt is still on Experian and still showing as a default every month..? Although I am scared to query it because of the fact it may highlight my debt and they mmay take money out of my current account. I also have a £1200 overdraft so I need to clear that before switching my current account. I think my aim will be to clear that in 3 months and switch accounts. Then query the fact that the 10 year old debt is still showing as default on my credit report.
Thanks so much again x

lollyhop

Are there accounts where its locked away? That would be great. I am so detiremined to clear these debts it has to happen but I suppose if the temptation was taken away it would be even better!

MFWannabe

Check out Savings accounts link on here it gives you information on accounts where you can 'lock' your money away for 12 months.
You need to include your overdraft as a debt. You need to open a new account with another bank now. At the moment Halifax could take all your wages to pay off their debts.

sofababe

lollyhop wrote: »

Are there accounts where its locked away? That would be great. I am so detiremined to clear these debts it has to happen but I suppose if the temptation was taken away it would be even better!

You could put it in an account where you need to give 90 days notice, then if you're tempted to spend it you'll have to wait 3 months. When you set up your new current account ask about a savings account too. Explain that you're saving for something in a years time and see what they've got.

Have a look at the Halifax reference on your Experian file. It should give you a default date.

lollyhop

Thanks so much for all the advice. Will Apply for a new current account today. Any tips on a good one that they wont credit check me for?

sofababe The default date is updated every month! So although I defualted 10 years ago and have paid my agreed amount every month on time since then... it looks like a new debt. Maybe once I am free from worrying they will take my wages to pay the debts I will question this.

lollyhop

Ok... so the final plan has been decided upon!

I need to clear my Halifax overdraft before I get a new current account because if I close the account with it on there I will be paying £30 OD fee every month. Halifax charge a £1 for every day you are overdrawn!!

So that will be done by Feb. Then i will move current accounts and open a savings account with a 12 month lock facility.
Then I will save £400 per month until end 2011. Once i have moved current accounts I will query with halifax why they didnt leave the defuault dat eat 10 years ago and why therefore the debt is showing as new on my Experien report.

Good Plan?

Everyone has been really helpful. Thanks so much xx

DVardysShadow

lollyhop wrote: »

Ok... so the final plan has been decided upon!

I need to clear my Halifax overdraft before I get a new current account because if I close the account with it on there I will be paying £30 OD fee every month. Halifax charge a £1 for every day you are overdrawn!!

So that will be done by Feb. Then i will move current accounts and open a savings account with a 12 month lock facility.
Then I will save £400 per month until end 2011. Once i have moved current accounts I will query with halifax why they didnt leave the defuault dat eat 10 years ago and why therefore the debt is showing as new on my Experien report.

Good Plan?

Everyone has been really helpful. Thanks so much xx

:eek::eek: Suggest you open a new current account now!!!!

If you leave the current account as it is and pay in your new salary, everything people are warning you about them raiding your current account is likely to come true.

Your debt with Halifax is separate from the overdraft on your account. You should open the new account, transfer your pay and all SO's and DD's. Then just clear the overdraft and carry on paying off the debt.

lollyhop

But I'll have to pay £30 a month interest on the overdraft..? Although I suppose its only until Feb..