repaying debt - A bit confused?!

greatfloyd69

I'm wondering if there's anyone that can advise me how to go about sorting my debts out? I repay every month without fail, and in no way am I experiencing difficulty meeting these repayments.

I've had my fun in the past, and the money I repay (waste!) could be enhancing my boyfriend's and my step childrens lives, and it's time I did something about it.... but I'm not sure what to do for the best!!!

A little background.... my boyfriend was declared bankrupt on 5th Jan 2011, he's in the middle of a financially messy seperation, and I want to try and offer more support but cant because of my debt repayments. I know that if i work hard (overtime+being frugel) for 6-12 months it would make a massive difference.

I have 3 credit cards, 4 hire purchase agreements and 1 loan.

If I sit and figure out all the interest rates on each debt, should I focus on repaying the debts with lower amounts i.e. £500 to close one of the CC's, or should I focus my attention on whichever has the highest interest rate?? And am I wrong in thinking that its pointless paying half an outstanding balance? Is it only worth paying a card off in its entirety?

I'm sorry if this is all explained elsewhere but mathematics and figures really aren't my strong point.

Tixy

Hi

Mostly we would advise to pay off the most expensive debt first to minimise the interest you pay.

But there are reasons people to choose to do it in a different order, sometimes for the boost of being able to clear a small debt quickly, which is a great motivator for carrying on. Another thing people sometimes do is clear off a small balance on a credit card in the hope that a couple of months later the card provide may offer you a 0% promo deal which you can then move a more expensive debt to. Of course its never guaranteed that they will do this but some seem more likely to that others (MBNA are one of the best for this). It also depends on your relative interest rates and credit limits as to whether its worthwhile etc.

You could have a look at the snowball calculator on whatsthecost.com and have a play around with different ways of paying things off and the difference it makes to that interest you pay overall and the time to your estimated debt free date.

http://www.whatsthecost.co.uk/snowball.aspx

chevalier

Hi there
you may with to fill in the following

http://www.makesenseofcards.com/soacalc.html

This will give you an idea of your income and outgoings. You will need to find the paperwork for the debts so you know what the APR is for each debt. Without this it is a bit difficult to advise you. Usually it is best to pay off the debt with the highest APR first.

will keep an eye to see how you are doing
chev

CH27

greatfloyd69 wrote: »

I'm wondering if there's anyone that can advise me how to go about sorting my debts out? I repay every month without fail, and in no way am I experiencing difficulty meeting these repayments.

I've had my fun in the past, and the money I repay (waste!) could be enhancing my boyfriend's and my step childrens lives, and it's time I did something about it.... but I'm not sure what to do for the best!!!

A little background.... my boyfriend was declared bankrupt on 5th Jan 2011, he's in the middle of a financially messy seperation, and I want to try and offer more support but cant because of my debt repayments. I know that if i work hard (overtime+being frugel) for 6-12 months it would make a massive difference.

I have 3 credit cards, 4 hire purchase agreements and 1 loan.

If I sit and figure out all the interest rates on each debt, should I focus on repaying the debts with lower amounts i.e. £500 to close one of the CC's, or should I focus my attention on whichever has the highest interest rate?? And am I wrong in thinking that its pointless paying half an outstanding balance? Is it only worth paying a card off in its entirety?

I'm sorry if this is all explained elsewhere but mathematics and figures really aren't my strong point.

If a card has a high interest rate, pay as much off as you can as it will reduce the amount of interest you will pay.

greatfloyd69

Thanks for the advice, I'm digging out paperwork as we type....I find it difficult to anitcipate just exactly how much I can repay every month, because sometimes overtime is not avaliable, or we have extra outgoings such as 18th Birthdays! But I'm definately committed to clearing my debts, I'm intent on setting a better (more frugel) example to my OH's children than his XW, who thought it was her god given right to shop. I think I'm leaning towards paying the lesser debts first. I took out a capital one card when i was struggling for credit, but the APR is ridiculously massive. This is the the card with the lowest balance.... So that definately goes first!