advice on what to pay first

needtopaymydebts

Hi
I'm just after a quick bit of advice and opinions on which order to pay of our debts. I understand that we are lucky in that we don't have a huge amount of debt outstanding in comparison to others but we are in a fair bit of negative equity and as we would love to move to a bigger home we're feeling sorry for ourselves at the moment! so here goes

we have
£840 credit card 0% for 9 months just transferred balance today
car finance which i have requested a settlement figure which stands at £2984 if paid by 23 April (not sure on interest rate of this)
mortgage made up of £92,000 mortgage, £8000 secured loan and £11,000 unsecured loan Northern Rock Together mortgage now with NRAM on 4.74% i think. so £111,000 ish. There is a house similar to ours in the same street for sale now at a price of £115,000 although the last one to sell went up for £100,000 and eventually sold for £88,000 so i'm thinking the sold price is more realistic than the current asking price! which leave us with a fair bit of negative equity.

we had been making overpayments to the mortgage until i started maternity leave. However, stopped this in the summer for a mortgage break and now just make minimum mortgage payments which are around £650 each month. We have been paying money into a cash ISA and have £1300 saved, in February and March wage I will be getting an extra £300 a month which i intend to pay towards debt payments and we have been paying £300 a month into the ISA so by my calculations at end of April we will have £2800 in the ISA which will be almost enough to pay off the car.

My question is though, if someone gave me £3000 today would i pay off the car completely or reduce the Secured Loan attached to the mortgage.

at the moment my thoughts are to pay off the car, then the credit card then concentrate on the Secured Loan? I haven't a clue which bit of the mortgage to pay after this, does it matter between mortgage and unsecured loan? i'm guessing maybe pay unsecured loan first then we will only have the mortgage left and as we're hoping to move to a bigger property we will then continue just having a mortgage to pay and only the one debt?

any advice or ideas would be great as I keep changing my mind and i'm driving my husband insane with my constant goal changing. I need an idea then to stick with it until we can sit in our lovely new home (in about 10 years time! by the time we get it the kids will be old enough to have their own homes rather than sharing rooms!!!)

thanks for reading this far, i imagine i have waffled a bit!

cottonhead

Its a nice feeling to have savings but its pointless to keep saving if you have debts. The mortage I would say is something that most of us have live with until we have no other debts and spare money and can then increase payments. The rule I guess is to pay the debt with the highest interest as thats what will be costing you more. Take care that the credit card doenst get forgotten as once the interest starts it will be an expensive debt. Seeing as its small I would be tempted to get rid of that and then the car.
That might not be technically the best way if you worked out the sums Im not sure. However if the credit card and car loan are cleared, thats 2 accounts marked as settled on your credit file and the relief that you have 2 less debts. Then you can start on the loan and will have more money to do so as you wont have the car repayments. I find it easier to focus on one or two large debst than several smaller ones.

neverbefore2011

I wouldn't even consider paying off a 0% credit card debt!

Car Loans, HP, Personal Loans, Unsecured Loans, very often apply penalties for early settlement, so it's very hard to calculate the cost

If your Credit History is faultless, then look at a Regular Monthly Savings account - First Direct used to pay 8%, but that may have changed

If you have a totally flexible mortgage account, then that might be the best place to put your money because you can get it back if you need to

camuk81

At the minute without knowing the apr and the monthly payments it's a bit hard to make a guess.

The others are right though I'm guessing the loan is somewhere in the remit of 9% upwards apr. at the minute you may be getting 4% if you lucky on your isa.

Though the intentions are there the problem is you still have a shortfall.

Have a check on all the apr and the terms of the loan,

Forget the mortgage for the time being and any long term lending that's over say 25 years. Politely if you paid 3k off you mortgage it would make a difference of maybe £100 max dependent on your rates.

You may have better impact on say the loan if it was £200 a month as that's another £200 toward your debt

needtopaymydebts

hi
sorry i hadn't made that very clear in my waffle.

the secured and unsecured loans are both attached to mortgage and so all 3 separate parts are 4.74% if we move though and separate the unsecured loan from the mortgage the interest would go up to nearer 17% or something? not sure as it's not going to happen in the next couple of years at least.

I have only had the ISA since before christmas, mainly as a savings place to put aside money which we intended to use to pay off the car finance as obviously we can't make overpayments to that only clear the final balance.

thanks for your advice so far
x

neverbefore2011

needtopaymydebts wrote: »

the secured and unsecured loans are both attached to mortgage and so all 3 separate parts are 4.74%

I find that very surprising - an unsecured loan at 4.74% seems very unlikely

As well as the various apr's you need to find out about penalties for early repayment

camuk81

How soon are you looking to move as that loan jumping up to 17% is alarming depneding on the apr of the one you are trying to clear

neverbefore2011

I just realised - this is Northern Rock, innit?

I am beginning to work out the small print of their 125% mortgages - and I fear that they have stitched you up completely

I think you should consult a mortgage adviser to see how to deal with this

needtopaymydebts

Hi, yes the rates are all at NRAM standard variable rate. As we're in negative equity a mortgage advisor can't really do much as we can't remortgage with no equity. From the responses here I think my aim will be to clear the car finance in April as planned with money saved and saving extra until then. Yes there is early payment fees but I think it works out less than paying it over the next 2.5 years. That will free up enough money to clear credit card in a couple months.( yes its 0% but the next bit of debt is so huge i dont think s couple of months will make a difference!) then make overpayments on secured loan, then unsecured loan and once they're both gone we might hopefully have some equity in the house to move. If not we'll overpay the mortgage until we are in a position to move on. Basically if I could move tomorrow I would, but I'm not going to allow myself to get into this position again so we'll stay put as long as we need to!

Thanks for your comments everyone. I'm in for the long haul, this might take a while :-)

needtopaymydebts

There are no early repayment charges on any loan connected with the mortgage or the actual mortgage, we're out of our fixed rate and NRAM want rid of us as much as we want rid of them!

camuk81

Try having a look at a

http://www.whatsthecost.com/snowball.aspx

It's difficult to work out the amounts saved but they would usually say highest apr,

Clear the car, then decide what you are going about the 0%, if you can clear then do but think about that unsecured loan as well. There is ups and downs to both sides