£12,000.- in debt & 10,500. in savings!

treasureirealnds

I have £12,000 worth of debt (car loan and credit card). I have stashed away £10,500.
I know what you are all thinking, why have u got debt when u have this much in savings!

Well I split up with my husband about 6 yrs ago, sold our home and i got some £££ out of it . Blew a lot of it and this is whats left. I kept it back as I hoped one day i could buy another property (now with new husband) and have 10 grand deposit. Well house prices as they are, no chance.

But i feel secure with that £££ sat there. After one messy break up im a bit cautious and if worst was ever to happen i know me and my children are secure financially.
We are renting privately which is costly and if landlord was to terminate contract we would need a couple of grand to move. if i didn't have savings and couldn't get loan for this where would we be!

But been thinking and read thru Martins post which say pay off debts first! Should I???

Is it good to have some ££ put by or should i ditch the loans.

Any advice would be much appreciated

maralum

I would always suggest ditching the debt. It can turn nasty and really cause problems for you.

Then I'd say to put all the money that was going on debt payment into savings instead. Best of both worlds, without the risk of bailiffs!

Good luck with your decision.

Penny2myName

Very interesting dilemma, I will be watching this one closely. Wish I could advice but I'm in no situation to.

On a personal level, if I felt i could save the money I would no longer be paying to the loans, I would be tempted to clear debts and restart saving. If I felt i would just blow the money each month, would keep savings and keep paying monthly to debts. Truly believe this is one that depends on your savings personality and ability.

BAILIFFCHASER

If i were you then i would put it into premium bonds which even though do not gather any intrest would still give you 10000 thousand chances to win the £1million prize. also the money would be available instantly.

treasureirealnds

Penny2myName wrote: »

Very interesting dilemma, I will be watching this one closely. Wish I could advice but I'm in no situation to.

On a personal level, if I felt i could save the money I would no longer be paying to the loans, I would be tempted to clear debts and restart saving. If I felt i would just blow the money each month, would keep savings and keep paying monthly to debts. Truly believe this is one that depends on your savings personality and ability.

yes, thats what worries me, repayments a months at moment are £300. I know, even as much as i'd want to, i wouldn't save it!!

CLAPTON

can you tell us about the debts
how much, monthly repayment and APR

and how much are you earning on the savings

poppy_f1

im with the ditch the debts school,however if you would feel more secure b having some savings why dont you pay half towards debts which would still give u 5k in the bank

maralum

I understand just how hard it can be to keep yourself to a set financial state, that explains my £26,000 of debt and £70 savings! It's going to take us 10 years to get out of the mess that we've gotten ourselves into, so this is a matter very close to my heart.

The way I see it, if you pay off your debts now and force yourself to save the money, you can be free from debt and have your £10,000 back in just over three years. To me, that sounds heavenly. Plus you'd have the great sense of self-satisfaction of being your own person, beholden to no-one. Your children would also see just how to use money to help themselves, not the banks!

I wish you the very best in your decision, I know it's a tough one. I've never had £10,00 in the bank, so I can't imagine just how tough! Good luck.

beanielou

Why dont you pay off the credit card & keep the car loan?
That way you still have some security.

treasureirealnds

CLAPTON wrote: »

can you tell us about the debts
how much, monthly repayment and APR

and how much are you earning on the savings

Credit card £1400 and Next directory is £600. I have been transferring my balance to 0% interest for last few yrs, so paid no interest, just paying off bit each month and slowly coming down. pay £50 a month on each. No longer have CC, cut them up after transferring balance. But regularly spend on Next. Interest this month on £600 is £15!:eek:

Interst on my car is 7.4% with Tesco loan. £200 per month

I have half my savings in ISA account. So no tax and interest is 5.5% and rest in a Nationwide members ISA bond @ 5.4% (no tax).

Crown

Hi Treasure,

I agree that you should pay off the debt if you have savings for the reasons mentioned above.

If you are worried why not keep a small amount back?

Say you kept £2500 and left it in the account at 5.5% interest and then paid the £300 month into a savings account once the rest of the debt was gone.

Compund interest working in your favour is a very powerful tool and you would have resaved £10,000 ina very short amount of time.

April 2007 £300.00 £11.30 £2,811.30
May 2007 £300.00 £13.13 £3,124.43
June 2007 £300.00 £14.12 £3,438.56
July 2007 £300.00 £16.06 £3,754.62
August 2007 £300.00 £17.54 £4,072.16
September 2007 £300.00 £18.41 £4,390.57
October 2007 £300.00 £20.51 £4,711.08
November 2007 £300.00 £21.30 £5,032.37
December 2007 £300.00 £23.51 £5,355.88
January 2008 £300.00 £25.02 £5,680.90
February 2008 £300.00 £24.82 £6,005.72
March 2008 £300.00 £28.05 £6,333.78
April 2008 £300.00 £28.63 £6,662.41
May 2008 £300.00 £31.12 £6,993.53
June 2008 £300.00 £31.61 £7,325.15
July 2008 £300.00 £34.22 £7,659.36
August 2008 £300.00 £35.78 £7,995.14
September 2008 £300.00 £36.14 £8,331.28
October 2008 £300.00 £38.92 £8,670.20
November 2008 £300.00 £39.19 £9,009.40
December 2008 £300.00 £42.08 £9,351.48
January 2009 £300.00 £43.68 £9,695.16
February 2009 £300.00 £40.91 £10,036.07


I realise the above figures are a rough estimate but you can see that it wouldnt take a long for the savings to build. As long as you have learnt that using credit and not paying it off each month is a bad idea then I dont think you will have any problems in the future as you will be rady to tackle them.

Take a look at the whatsthecost.com if you are intersted in the savings and interest that can be earnt

Good luck