Paying off Student debts with Windfall!

rose28454

My son graduated last year and is just about to move to London to start his first proper job. He has £900 cc debt and two Graduate accounts with overdrafts (Lloyds £980 o/d with £1500 limit, HSBC £1738 with £1750 limit).
He has just had a letter to say he is getting an insurance payout for a shoulder injury of £3450.00. He also has a new CC with 1 years Interest Free balance transfer facility with £400 limit which he has not used yet.
Just want to know how to advise him the best thing to so with the money as the two bank accounts are interest free for the next two years although reducing limits each year.
What advise shall I give him?

Voyager2002

Don't be in a rush to pay things off: he will have all manner of moving expenses and living costs before he receives his first month's salary, and borrowing to cover these costs will be at a far higher rate of interest than what he is currently paying.

Interest-free loans should not be repaid until they start charging -- better to save the money and leave it earning interest.

Credit card interest rates are generally high and so balances should be repaid as soon as feasible. Remember that there is usually a fee for transferring a balance on to a new credit card, so better to use the interest-free card for spending and just pay the minimum monthly payment so long as it is interest-free.

Does he need any special equipment to cope with life after the shoulder injury? Does the injury increase his living costs in any way? If so, the windfall payment should be used in this way.

rose28454

Voyager2002 wrote: »

Don't be in a rush to pay things off: he will have all manner of moving expenses and living costs before he receives his first month's salary, and borrowing to cover these costs will be at a far higher rate of interest than what he is currently paying.

Interest-free loans should not be repaid until they start charging -- better to save the money and leave it earning interest.

Credit card interest rates are generally high and so balances should be repaid as soon as feasible. Remember that there is usually a fee for transferring a balance on to a new credit card, so better to use the interest-free card for spending and just pay the minimum monthly payment so long as it is interest-free.

Does he need any special equipment to cope with life after the shoulder injury? Does the injury increase his living costs in any way? If so, the windfall payment should be used in this way.

Thanks for the advice. The shoulder injury was caused when he was knocked down 8 years ago and broke his arm. It all healed up but subsequently his shoulder started to dislocate on a regular basis and 2 years ago he had have a bone graft and a pin put in it. He just needs to be careful playing sports and Rugby is out of the question but when he plays football he wears a shoulder support which helps. He was recently in New York working for the UN and he played for the football team for 12 weeks and his only injury was to his knees. But I think I will suggest he buys a couple of decent pillows as when he sleeps in a bed with one pillow or on a floor he gets some pain. The insurance company say he has lost 5% use of his shoulder and that determined the payout. I will let him read all the suggestions I get so he can start his working life on a good basis. Many thanks

Kilty_2

Credit card debt that attracts interest should be paid off first, if the rest is at 0% then put the remainder of the money into a savings account until the banks are going to start charging, then pay those off too

rose28454

Kilty wrote: »

Credit card debt that attracts interest should be paid off first, if the rest is at 0% then put the remainder of the money into a savings account until the banks are going to start charging, then pay those off too

Thats what I had suggested to him already before I thought to ask MSE'R for advice. I also suggested an ISA.
Thanks

melancholly

rose28454 wrote: »

Thats what I had suggested to him already before I thought to ask MSE'R for advice. I also suggested an ISA.
Thanks

an ISA is always a good idea - but only if you don't have anything left to pay off (student loans probably excluded from that). if he gets money into an ISA soon, it will earn the most possible interest in the 07/08 year!