Some financial advice please? :-)

FiftyPents

I'm a bit rubbish with money, and I was hoping that somebody might be able to give me a bit of guidance on what to do with my current situation?

I've got a credit card with debts just over 4,000.

I've also got a loan that is due to end in September, which i'm paying just over 350 quid a month fixed amount on, and is currently at 2,400.

I earn, after tax, 1700 pounds a month, and I have a savings fund built up now of just under 1500 pounds.

The only monthly outgoings I have, aside from the loan, adds up to about 250 pounds.

I'm considering talking to a financial advisor really, because I'd like to clear all my debts by the end of the year, ideally having some sort of savings to work with too, but I don't really know what the best method would be.

Would it be better to clear down my 2400 bank loan with my savings? Or is it better to leave it there and continue paying the monthly amount?

The interest on the credit card is 0% until next year, which is good.

Have I given away too much information here?! Hope I haven't!

Tixy

Hi

Don't worry about giving out information - its an anonymous forum and the more info you give the more it helps people advise.

Firstly does your loan allow overpayments without penalty?
From the sounds of it by next month you will have enough in your saving to pay off the loan in full? what apr are you paying on the loan? what apr are you earning on your savings?
My guess is the loan interest will be much higher so it would be financially beneficial to pay off the loan as soon as you can.

After that then I would start saving your surplus in future months. Make sure you keep at least £4k in an account you can access before your credit card starts charging interest (presumably it will only take 3months to build this figure up.

Then with the remaining savings you want to be looking where you can find the best returns. Do you have any long term plan for your savings? might you need quick access to them at some point? With your savings I would suggest you first look at what ISAs are giving the best tax free returns. You might also want to consider contributing to a pension scheme if you don't already - which also has tax benefits (as well as the benefits of saving for your retirement).

NeverAgain_2

In general terms, it makes no sense to have savings when you are in debt.

You are paying to borrow your own money.

You might like to keep a little in a rainy day fund, but other than that, use all your savings to pay down interest bearing debt.

FiftyPents

Tixy wrote: »

Hi

Don't worry about giving out information - its an anonymous forum and the more info you give the more it helps people advise.

Firstly does your loan allow overpayments without penalty?
From the sounds of it by next month you will have enough in your saving to pay off the loan in full? what apr are you paying on the loan? what apr are you earning on your savings?
My guess is the loan interest will be much higher so it would be financially beneficial to pay off the loan as soon as you can.

After that then I would start saving your surplus in future months. Make sure you keep at least £4k in an account you can access before your credit card starts charging interest (presumably it will only take 3months to build this figure up.

Then with the remaining savings you want to be looking where you can find the best returns. Do you have any long term plan for your savings? might you need quick access to them at some point? With your savings I would suggest you first look at what ISAs are giving the best tax free returns. You might also want to consider contributing to a pension scheme if you don't already - which also has tax benefits (as well as the benefits of saving for your retirement).

I'm not too sure what the APR is, but i'm paying in 361 pounds a month, and the interest that accumulates each month is about 28 pounds.

The savings I have are currently just sat in another bank account, not an ISA or a saver, I really need to move them over to one, its just a case of picking the best one?

So you'd advise clearing the loan first, as quickly as possible, then would I concentrate on clearing the credit card, or just make sensible amounts each month whilst keeping a savings fund?