Paying off debt?

scottishsuz

Hey folks,

I'm new to this board, please be gentle...

At the moment I have approx £7768 in unsecured debt from an AA loan and my student loan.

I want to get these paid off asap, at the moment I'm saving £130 a month to put towards my AA loan (6.1%) which had a redemption balance of £3356 in Sept by my calculations along with savings I already have this should be cleared in 7 months. I pay around £11.00 a month from my wages to my student loan which had a balance of £4412 in Apr 2006 and make a further £20 overpayment per month, once the AA loan is cleared this overpayment will be upped to about £80.

I'm also making an optional overpayment to my mortgage of £30 a month, this will be upped again once the AA loan is paid.

Do you think this is the best spread of pennies? I've been staring at a spreedsheet for so long that I'm sure I might have missed a better option?

Thanks in advance,

Suz

elantan

it does seem like a good plan to me but if you post your soa i'm sure we can find more savings and things to help you on your way ..if you look at the snowball calculator aswell that will tell you how best to spread your money ..good luck

lynzpower

hiya Suz :wave: Welcome to DFW

I think yes, focusing on the AA loan is the best way, as this has the highest APR. Do you have any overdrafts or anything?

Your best bet is to post up a SOA ( statemet of affairs) then we can see what extra savings there are to help pay your debt off quicker and ditch the millstone asap!

Lynz
x

Serialdieter

Hi

Here's the link for the snowball calculator http://www.whatsthecost.co.uk. If you can post your soa I'm sure there will be other savings to be made.

Jx

scottishsuz

Thanks for the replies so far, here is my SOA

Income 1021

Expenditure

Loan 130.34
TV Licence 11.5
Gas & Electricity 40
Life insurance 8.5
Phone 30
Student Loan 20
NSI 130
Food and sundries 70
Mortgage 273
Mortgage overpayment 30
Car 70
Council Tax 78

Total 891.34

Balance 129.66

Any suggestions more than welcome,

Thanks

Suz

KatrinaC_2

scottishsuz wrote:

Thanks for the replies so far, here is my SOA

Income 1021

Expenditure

Loan 130.34
TV Licence 11.5
Gas & Electricity 40
Life insurance 8.5
Phone 30
Student Loan 20
NSI 130
Food and sundries 70
Mortgage 273
Mortgage overpayment 30
Car 70
Council Tax 78

Total 891.34

Balance 129.66

Any suggestions more than welcome,

Thanks

Suz

Hi Suz. You seem to be doing OK. The only things I would suggest are putting the overpayments for your student loan and mortgage towards your loan as both of these are almost certainly going to be at a lower interest rate. Once you have that paid off, move that overpayment to the debt with the next highest interest rate (probably your mortgage?) and then finally to your student loan (which has an interest rate near inflation).

Oh, and make sure that the overpayment money you are putting aside for the loan goes into the highest interest rate account you can get.

Kat

KatrinaC_2

Oops - double posting
Kat

scottishsuz

Thanks Kat,

My only concern with my student loan is that it is accruing about £11 a month interest so if I stop making overpayments I'll only be paying the interest and nothing else. Is it still more worthwhile to use it for savings?

My savings account is a mini-isa with the post office.

Suz

KatrinaC_2

scottishsuz wrote:

Thanks Kat,

My only concern with my student loan is that it is accruing about £11 a month interest so if I stop making overpayments I'll only be paying the interest and nothing else. Is it still more worthwhile to use it for savings?

My savings account is a mini-isa with the post office.

Suz

Your Student loans have an interest rate of 2.4%, your mortgage is likely to have an interest rate of 5-6%? In this case it looks like it would make sense to overpay on your mortgage.

So long as you put your overpayments towards the highest interest rate, you will pay off your overall debt fastest. To be certain, put the figures into the snowball calculator suggested above and see what it recommends.

When you've cleared as much of your mortgage as you want or are happy with, putting your overpayment money aside into a savings account rather than overpaying on your student loans MAY make financial sense if:
a) You earn more from interest than you would save if you paid off more of your loans
b) You are happy to have your student loans in the background.

Again, you'd need to sit down and work this out to be certain.

Kat

scottishsuz

Hi Kat,

Thanks again, I've re-giged my payments so the bigger loan will be paid off more quickly. I can't wait till its all gone, 6 months and counting

Suz