My first post. Some advice please

Undercovercarrot

Hi everybody.

I would like a little bit of advice. I left university 18 months ago and I am in a bit of debt. I have 2 credit cards, both at 18.9% APR which I am near the limit on (£1400 and £3000, with payments of £130 and £180pcm respectively). I have also got a loan at 6.9% for my car, which is not a problem, around 215pcm. My car insurance is up for renewal this month, and I expect it to be around £750, but I can spread it over a 12 month period. Rent and bills are dealt with before I get any money to spend on other stuff. I have no overdraft on my bank account. I have tried to get new credit cards with 0%APR, but none of them want to touch me (and I am getting a bit worried about appplying for so many). Finally, I have an HP agreement at the horrendous rate of 24.9%APR for a projector, with about £920 left to pay on it (£30 pcm)

Anyway:

This month I am getting a pay bonus, and I want to know how to use it best. It will be around £700-£800 on top of my normal pay, and I have decided to do what I want with it. Do I -

a: pay my entire insurance in one lump and therefore not have to worry about it for a year? (my preferred option)

b: pay off as much of the horrendous HP as possible?

c: pay off some of my credit card?

d: stuff it in a savings account?

Thanks!

budgetflyer

Check what APR and how much you can get an overdraft with your bank . Max out the Lowest APR whether it OD or CCs. Service the Lowest APR with MINIMUM PAYMENTS ONLY thereby asigning as much as you can to repaying highest APR.
Buy THE MONEY DIET book. The strategies are fully explained in detail. I've read it about 5 times now and still learn from it

mountainofdebt

To go for the debt with the highest APR first and once that is paid off put the money you were using to service that debt to pay off the next highest.

I can understand why you would choose the car insurance though (pyschologically speaking it's nice to finally fill a hole or not have to worry about it for another 12 months isn't it!) and to put it into the savings account (just in case) but I think to be honest if I were in your position, I would be strongly tempted to pay off the HP.

Once that is paid off I think I woudl go for the credit card with the highest balance on it. (Have you tried getting them to reduce the balance ...even if its only 1-2% then any reduction is as good as anything.

downandout!

Undercovercarrot,

Here are some calculations from the info provided :-
(for porposes of calcs I will assume bonus is £750)

HP - Balance outstanding (BO) = 920
Interest (APR 24.9%) = 229.08 (for this year only)
If £750 cleared (BO) = 170
Interest (APR 24.9%) = 42.33 (for this year only)
Total savings on interest = 186.75

CC1 - BO = 1400
Interest (APR 18.9%) = 246.60
If £750 cleared (BO) = 650
Interest (APR 24.9%) = 161.85
Total savings on interest = 102.75

CC2 - BO = 3000
Interest (APR 18.9%) = 567
If £750 cleared (BO) = 2250
Interest (APR 24.9%) = 425.25
Total savings on interest = 141.75

Therefore the greatest savings will be made from throwing the bonus at the HP. Hopefully this will also give you some indication of how much money you are giving away each year on interest. £1060.68 this year if you did not have this bonus coming in. :eek:

downandout!

Ps: Feel free to correct me if i am wrong. I am no expert and will not take offense.