Redundancy and Debt Advice

katgold

Like so many others, I am being made redundant on the 31st of March. We have been working towards being debt free for a few years and have been slowly getting there, but still have a hefty amount to pay off.

I am getting a decent settlement, plus as I am being made redundant whilst on maternity leave, I will be receiving my full SMP in one lump sum. What we aren't sure of is where the money is best placed.


As it stands, we can survive on my husband's salary, but only just. Our main priority is really to reduce all outgoings (again! Whilst adding a 3rd child to the family :eek:) until I am in a position to work again. This realistically won't be until my eldest starts school in 2012.

SOOO...the question is: what to do. The amount of money we will be getting does not pay off all of the outstanding debt we have...we have three lots of about £4k, and I will have £8k to pay off debt with the redundancy (after topping up the emergency fund).

Obviously, logic dictates that we should pay off the amounts where there is the highest interest rates to save money in the long term. Two of the debts have interest rates of roughly 15%apr. The loan we have is only 9%apr, but its minimum repayment is a hefty £200 per month and we will be charged a £250 early repayment fee. The other two cards have much lower minimum payments which we pay one of and then the minimum plus as much as we can afford on the other.

What we don't know what to do is where our money is best used now. On one hand, paying off the loan is tempting as it reduces our monthly expenditure the most. On the other hand, I completely get that the loan is a cheaper debt to service in the long run.

Advice?

lvm

Hey,

Personally I would go for the highest APR debts - think everyone's advice would be the same on this.

The only other thing I would maybe think about is paying a lump sum towards your loan. Of course that would depend on the value and if there were any fees for doing so.

Or you could keep £1, 200 by so you know you've got the next 6 months loan repayments (but not really ideal as it'll cost more in interest).

Would you not be eligible for a 0% balance transfer card? Why not phone up 1 of your 3 providers and see if they'll give you a cheaper deal to transfer the other CC balances too? That way it may be more worthwhile paying the loan off.

A few options but just have to think what's right for you.

On another point, make sure your employer pays you any untaken holiday entitlement you would be owed as well.

Hope you figure something out x