What debt to pay off?

symmndarcy

Hi All,

Next month I come into a bit of awork bonus (after taxes £3200) and need some help deciding what to pay off.

I have £9000 worth of debts - all showing on my credit file but only 2 haven't been passed to DCA. I have agreed payment plans with the DCAs and though the balance is reducing on my credit file it doesn't actually show I am up to date with current payment plan. All my debts are being paid off now - costing me £370 a month

I can either pay off the HP/personal loan through the one company which will leave me paying £250 a month for the remaining debts which will all be cleared by October 2012. Only downside I can see to this is that the HP/personal loan on my credit file shows all payments up to date etc so if I didn't pay this off it would slowly help to improve my credit file.
Or I could pay off by all the other debts by offering my DCAs 85% settlement figures which in turn would leave just my HP/personal loan at £120 a month but obviously I would have to pay this for next 4 years.
Or could I go for a combo deal - pay off 2 of the biggest DCA debts which would save me approx £120 a month and pay off £1500 on my HP so I would still continue to pay £250 a month, the little debts would be clear by October 2012 and the HP/personal loan could then be paid off within 2 years.

Can anyone suggest what they would do and why or if none of these an alternative suggestion?

Thanks Simon

Tixy

If your debts are with DCAs and you are considering F&Fs - then I would start by offering a lot less in full & final than 85%. How long would it take to clear your DCA debts if you carry on with the currently agreed repayments? the longer that is the lower the F&F they are likely to accept. Personally I'd start with an offer of well under 50%.

If you do go the F&F route there is a useful factsheet and template on the national debtline website (which you may aleady know about).

symmndarcy

Tixy wrote: »

If your debts are with DCAs and you are considering F&Fs - then I would start by offering a lot less in full & final than 85%. How long would it take to clear your DCA debts if you carry on with the currently agreed repayments? the longer that is the lower the F&F they are likely to accept. Personally I'd start with an offer of well under 50%.

If you do go the F&F route there is a useful factsheet and template on the national debtline website (which you may aleady know about).

Thanks for the advice - my HP/personal loan is for another 5 years and I pay £120 a month for this. The other debts with DCAs will be cleared by October 2012 and costs me £250 a month.

Tixy

Presumably the DCAs are not charging interest?

It difficult then, it depends on whether you want to pay the least amount possible overall, or whether you want to improve your credit rating as quick as possible, or to have finished all debts as quick as you can.

Does the loan/HP allow you to make ongoing overpayments without penalty?

I suppose you could try getting low F&Fs out of the DCAs and then anything you have left over put in a savings account. Then put the £250 a month in the savings account and hopefully you'll be in a position to pay off the loan/HP much earlier than the 5years?

symmndarcy

Tixy wrote: »

Presumably the DCAs are not charging interest?

It difficult then, it depends on whether you want to pay the least amount possible overall, or whether you want to improve your credit rating as quick as possible, or to have finished all debts as quick as you can.

Does the loan/HP allow you to make ongoing overpayments without penalty?

I suppose you could try getting low F&Fs out of the DCAs and then anything you have left over put in a savings account. Then put the £250 a month in the savings account and hopefully you'll be in a position to pay off the loan/HP much earlier than the 5years?

None of teh DCA's are charging interest.
The personal loan/HP will allow me to make overpayments without penalty.

I was thinking of offering 50% as F&F and paying off whatever they want basically - this will free up £250 a month which will allow me to overpay on HP or if I get any other bills etc then I can afford to pay it off.

cassidy0111

Oh and a big well done for using the bonus to get your debt sorted. A sign of a true MSE'er I think.