Best thing to pay off first

alexjramsay1

Hi

I'm expecting a bit of a windfall at the end of January and would like to make an impact on my debts. The thing is that I'm caught in two minds what to do with it.

I have a number of high APR credit cards, so don't know whether to make a significant reduction on the one with the highest APR, or to make the reduction of one that I think will give me a good balance transfer offer once I clear some off, and then transfer the high APR one to it?

Also, I have some rental agreements that if I end them and buy the goods instead will likely reduce my monthly payments by a bigger amount than clearing a card, thus meaning I'll have more disposable income to use on my debts.

I hope this makes sense - hoping that someone has had this experience and can point me in the right direction.

Thanks

Alex

exarmydreamer

Take a look at the snowball calculator on here. Make a list of all your debts and put them into priority order, deal with the highest APR debt first and once paid go onto the next highest debt. Mean while, pay minimum to the others in order of priority.

Keep a spending diary and write everything down. It's amazing where the money goes. Post up an Statement of Affairs, (SOA) you'll find the sticky at the top of the page. Be honest and fill it in with you income etc. This will give you a good idea of what you can cut back on to free up some disposable income for debt payments.

It's great that you will be coming into some money, but as most people who have been in debt know, debt builds up and after paying it off it can build up again. Maybe useful to see how this happened and if it can be avoided in future. Hope this helps, good luck.

alexjramsay1

Thanks - I'm very aware of where all my money goes and am very frugal already! It was more of a question about what would impact my debt most - more disposable income vs a lump sum payment off the debt.

I guess though I'll pay it off the most expensive card and go from there.

Thanks

Verbatim

I suppose you have to work out both options and see which gives you the most debt busting power. i don't think I'd rely on the cc offering a 0% though.

harrys_dad

If those rental agreements are with someone like Brighthouse you are already paying nearly 30% interest and probably unnecessary insurance on top. I would view these as debts too, get a settlement figure for them, and see if that is better than paying off a CC.

alexjramsay1

Verbatim - Yes, made that mistake once, paid off £1000 off a barclaycard last month only to find they wouldn't even give me the 6.9% lifetime rate! Probably best to whack it off my HSBC card - 29.9% and scandalous!

Harrys dad - Just rented off an electrical store, no finance involved or end date just a rolling rental contract. £46pm for a washing machine, tumbledryer and cooker, to buy them all might cost £900 so would pay for itself within 2 years...

harrys_dad

Are you covered if they go wrong? Do they make you pay insurance in case they get damaged, stolen? Yes, it would pay for itself in under two years, whereas after two years renting you still have nothing