silly debt question

greenman_3

I have £1000 outstanding on a 0% credit card. I hate having debt over hy head! I have some savings in an ISA (10k)and wondered if it would be a good idea to clear the debt with the isa money or leave the debt and pay a bit off each month then pay it off with the isa at a later date, thus gaining more (savings) interest.

I am a bit reluctant to touch my savings, but am finding it tough to try and pay off the card by Dec by scrimping and scraping each month.

what would you guys do?

alexei_2

Why not pay the minimum payment to your credit card each month by withdrawing that amount from your worst performing ISA. Keep doing this until the credit card is paid off or until you are no longer able to transfer your balance to other 0% cards at which time pay the whole of the outstanding balance off.

Of course if you have taxable savings then use that money in preference to using ISA monies.

Joe_Bloggs

Thanks to alexie and that excellent reply. I find that people with money in ISAs tend to make irrational borrowing decisions. always prefering to leave the money in an isa as opposed to paying of a credit card debt at a much higher interest rate. Financial calculations here would help us all understand the pitfalls an virtues.

What are the future prospects for ISAs? They are dim acording to  my failing eyesight and dodgy crystal ball.

This is no criticism of anybody that was smart enough have them allready.
J_B (Grasping towards the future).

scof76

I have another silly debt question.

Fortunately, I have no outstanding debts, loans and I pay my credit card balance in full every month.

I have a project to buy a £7000 car and I'll need finance for most of it (I only have £1500 in accessible savings). I have £300 spare at the end of each month, 150 go to a Cash ISA, 150 go to an Investor ISA.

I am therefore wondering if I should take a loan out with monthly payment of 300/m and put my savings on hold for 1 to 2 years or take a loan out with monthly payment of 150/m and put only half of my saving on hold, but for 3 years at least.

What would you do?

Reaper

scof76 - taking out a loan will cost you more in interest than you are earning on your savings, so I would say use some of your savings to reduce the amount of the loan.

Do keep some for a rainy day though, you never know what's ahead.

However do you need to buy such an expensive car? You say the monthly payments could be as much as £300pm - that is all of your spare monthly cash! I'd suggest buying a cheaper 2nd hand one so you have some spare cash. If you don't own a car now then you will have lots of additional expenses and even if you do the insurance is going to be higher.

scof76

Thanks Reaper!
I do own a car at the moment, it's a 15 year old rover and it's dying on me. It's costing me a fortune in repairs and I thought I could save money but switching to a more recent (not new) but less expensive to run model.

You're probably right in saying I don't need a 7k car, though ... it's back to AutoTrader then

Thanks for the reality check!

vansboy

Scof - put that Autotrader away!!

If you're in the market for a car, sort your OWN loan - not a dealer, who'll make commission on it - then head off to the auctions!

Don't take your £$£$£$ with you - only need enough as deposit (10% of what you expect to spend) You then settle up with a draft or society cheque.

A couple of 'dry runs' to get the feel of things, look at the DIRECT vehicles - those coming straight from a branded leasing company fleet & you'll see substantial savings!!

Worth a peek in http://www.honestjohn.co.uk lots of good advice on there!!

VB

Rafter

Listen to reaper!

What is the point of taking out a loan for a car if you have the money in savings?

You will be paying say 7% on your loan but only earning 4-5% of savings?

As long as you have some 'rainy day' money to cover unexpected changes in circumstances I'd say cash in some savings now to buy the car, but be strict with yourself about building the savings back up from your income (and saved repair bills on the car)

The other alternative is to get an offset account of some kind where your savings automatically offset your borrowings and you only pay interest on the difference.

Sounds like all your savings are tax free already though, so the benefit might be marginal.