£20k in 20 months?

SuSu1871

Hi everyone!

After months of lurking and quietly getting on with clearing debts (I’ve managed to clear 1 £1,300 credit card and £2,500 loan in six months), I’m now left with two loans to clear. I really want to clear these in under two years so I can start saving for a deposit on a house. I have a pretty good idea of how to do this, but thought you might be able to offer some tips to shave of extra pounds. Here goes with my SOA:

Total outstanding debt: £20,786.76

Monthly Incomings:
My salary - £1,569.87

Other:
£33 - Money from brother for share scheme*
£25 - Money from flatmate 1 for gas/elec, phone and broadband
£43 – Money from flatmate 2 for Sky, gas/elec, phone and broadband
£50 – (approx) Money from flatmate 2 for share of food shopping
£100 – owed by my cousin (she owes me £700, paying £100 a month)
£50 – expenses (approximate – goes into slush fund for car bills, birthdays, Christmas, etc.)

* I am in a company sharesave scheme, where I pay £125 tax free (equates to around £97 a month) direct from my salary to buy shares. For every share I buy I get 1 5/6 shares free. My brother gives me £33 a month (approx 1/3 of what I pay for shares) and we’ll split them 1/3 to 2/3 when they mature

Total - £1,870.87

Monthly Outgoings:
Mortgage/Rent - £300
DD to flatmate - £55.50 (this covers council tax, water rates & TV licence)
Gas/Elec - £40
Sky £36
Broadband £20.00
Phone - £15
Food – £150
Petrol - £60
Child Trust Fund £20 (2 x £10 for nephews)
Northern Rock - £233.83
LloydsTSB - £531.35

Total: £1,461.67

Northern Rock loan £233.83 @ 11.9%APR
£5,000 at 11.9%APR taken out in Jan 07 for 24 months.

This is a flexible loan so I can overpay, although the interest charged will not change. So, total loan is £5,611.92. I’ve paid £935.92 in DDs and overpaid £1,200 with profit from matched betting. Outstanding balance is now £3.476.60.

LloydsTSB loan £531.35 @ 12.9%APR - balance is £17,543.82. This loan is not flexible so I can’t overpay.

I reckon if I overpay the Northern Rock loan by about £250 a month I’ll have it clear by November, then it’s time to switch the LloydsTSB loan to a flexible loan and overpay by about £450/£500 a month.

As I said, I want to be debt free in two years so I can start saving for a deposit on a house.

Is this the best way to tackle these loans, or can anyone advise on a better course of action?

Any advice appreciated.

SuSu1871

oliveoyl

:hello: hi

i know the urge is to pay all the debt off as soon as possible, but if you have to pay the interest on the loans anyway, you would be better off financially just paying the set payment on the loans, and putting all of the extra away in a savings account to earn you interest.

Redbedhead

While I think saving money for your nephews is a lovely thing to do, I think I would cancel it until you are out of debt.

Do you need Sky? Or could you change to a cheaper package?

Could you shop around for cheaper utilities? Without knowing the size of your flat it is difficult to tell if you are getting a good deal.

Do you not pay Council tax or for your water?

sandhabibi

SuSu1871 wrote: »

Mortgage/Rent - £300
DD to flatmate - £55.50 (this covers council tax, water rates & TV licence)
Gas/Elec - £40
Sky £36
Broadband £20.00
Phone - £15
Food – £150
Petrol - £60
Child Trust Fund £20 (2 x £10 for nephews)
Northern Rock - £233.83
LloydsTSB - £531.35

Second one down has council & water included...


I too would stop the nephews payments just for a while and also find cheaper broadband. Lower the speed of it or if already on the lowest some companies will give you a better deal if you say you want to cancel.. I said this to Ntl and payment dropped from £17.99 to £9.99.

lizzie12_2

Are you flat sharing or is it your own property.? Only asking as you said Mortgage/Rent..

What do you do with all your loose change?

We tend to put a fiver away for the children at birthdays and christmas. Then when they turn 18 there is the money for them.

Redbedhead

sandhabibi wrote: »

SuSu1871 wrote: »

Mortgage/Rent - £300
DD to flatmate - £55.50 (this covers council tax, water rates & TV licence)
Gas/Elec - £40
Sky £36
Broadband £20.00
Phone - £15
Food – £150
Petrol - £60
Child Trust Fund £20 (2 x £10 for nephews)
Northern Rock - £233.83
LloydsTSB - £531.35

Second one down has council & water included...


I too would stop the nephews payments just for a while and also find cheaper broadband. Lower the speed of it or if already on the lowest some companies will give you a better deal if you say you want to cancel.. I said this to Ntl and payment dropped from £17.99 to £9.99.

Oooopss, sorry - not reading very well in the early hours:rotfl:

SuSu1871

Thanks everyone for your comments. It was a bit late last night, so I must admit I missed a few bits of info off the SOA, but to answer your questions:

i know the urge is to pay all the debt off as soon as possible, but if you have to pay the interest on the loans anyway, you would be better off financially just paying the set payment on the loans, and putting all of the extra away in a savings account to earn you interest.

The interest is only set on the Northern Rock loan, which is the only one I can overpay on. I want to clear this asap so I can switch the LloydsTSB loan to a flexible loan which I can overpay.

While I think saving money for your nephews is a lovely thing to do, I think I would cancel it until you are out of debt.

I understand what you’re saying, but as it’s a trust fund I’m signed up till they’re 18 (they’re 3 ½ and 20 months old). Also, I don’t really see this as a “debt” – more of an 18th birthday present which they can use to help them through uni (if they choose to go), or their dad (my brother, who introduced me to MSE and is a HUGE support :A ) can reinvest it till they’re 21 or 25. I see it more as a stepping stone so they don’t have to go into debt as young as I did.

Do you need Sky? Or could you change to a cheaper package?

I pay £36 for Sky and one of my flatmates pays half, so it’s only really costing me £18 a month (the other flatmate doesn’t contribute because she’s hardly here). I have considered cancelling, but as I rarely go out it’s the one luxury I have, and we do get our money’s worth.

Could you shop around for cheaper utilities? Without knowing the size of your flat it is difficult to tell if you are getting a good deal.

I have already shopped around for cheaper utilities and this is the best deal I found. We live in a three-bedroomed house, so it’s a pretty good deal. I also got cashback when I switched and I earn Tesco points for each pound spent. :T


…find cheaper broadband. Lower the speed of it or if already on the lowest some companies will give you a better deal if you say you want to cancel.. I said this to Ntl and payment dropped from £17.99 to £9.99.

I did a comparison of other broadband providers, including combination packages of Sky/cable, broadband and phone packages. Whilst I could save £2 a month by switching all three to Sky, I read on this board of problems with doing this as you’re left without broadband for a couple of weeks. I need broadband at home to help me with my college work (I’m taking a marketing course at evening school). I will look into again in summer when I can afford to be without broadband for a little while.

What do you do with all your loose change?

Forgot to say this bit! I put ALL my loose change in a piggy bank and every couple of months I count it up and bank all full cash bags. I’ve banked around £60 this year. That was used to help clear the (now cleared) loan. I’ll continue to do this.

Thanks again
SuSu1871

Karmacat

Hi Susu, you sound pretty sorted to me, but having just read this little thread, I'm really puzzled about the loans. Are you *sure* that no matter how you overpay, Northern Rock will charge you as much interest as if you didn't make any overpayments at all? If that is accurate, it sounds like unfair practice to me, even if you signed up for it.

Also, how come you have to wait till you've cleared this (bad sounding) loan before you can switch the Lloyds TSB loan to one that you can overpay?

Sorry, you wrote when it was late, maybe I'm reading too early!

SuSu1871

Hi Karmakat

Thanks - I do feel pretty sorted. As I said, I've been lurking for months and hammering away at smaller debts before I posted my SOA on here. This site has been a godsend and I've taken loads of tips from it, and have passed them on to friends. I'm a regular preacher of MSE!!!

The reason why I posted is because I just wanted to know if my plan was the best one, i.e. pay off Northern Loan in under 12 months then tackle the LloydsTSB loan.

I've read all the small print on the Northern Rock loan and it does state that the interest on the full amount, which is just over £600 will be charged regardless of how quickly you pay off the loan. I presumed this was because the loan is a flexible one, so the loan company recoups its interest regardless of how quickly you pay.

I want to wait till I've cleared the NR loan before I switch the LloydsTSB loan because I think I'll be able to shop around for a better interest rate on the larger loan if that's all I have against my name.

I've paid off my last two credit cards and have cancelled them, and I also had a loan with Cahoot who put their interest rates up from 9.9 to 14.9 in matter of weeks. That's why I took the NR loan - to switch £5,000 of the £8,000 I owed to Cahoot. My plan was always to overpay initially on the Cahoot loan and clear any balance with my annual bonus (around £2,000), which I did and I've since closed that account.

The next part of the plan was to clear the NR loan in just over 12 months by paying the monthly payments then throwing next's year's bonus at it to clear it in March 2008. But because I've been far more organised with my money than I could've imagined, I'm in a position to overpay every month and clear it this year.

My plan then is to save £500 a month in Dec, Jan & Feb; add this to next year's bonus and when I move the LloydsTSB loan I only have to move what's left minus £3,500. If this is flexible, I'll overpay what I can and hopefully it'll be gone by the end of 2008. Depends what the balance of the loan is when I move it. Haven't figured that bit out yet.

I was planning to switch to NR, but if, as you say, it's not a great deal to have to pay the full amount of interest regardless of how quickly you pay it off, I'll look for an alternative. There just don't seem to be too many flexible loans out there.

That's my masterplan. If anyone has a better idea, I'm open to suggestions. I want rid of this debt so I can start saving for a house...

Prudent

What struck me when I read your post was your generosity. You leant £700 to your cousin, while being in debt yourself and put £25 away for your nephews.

I can't add any suggestions though as you are so sorted already. The only slight possiblity was food. I spent £90 per moth for two, but you are not spending a huge amount.

SuSu1871

Thanks Prudent

I've always been a bit overgenerous with my money, hence the debt! The thing with my cousin was more to help her out at Christmas. She's got a HUGE debt (100% mortgage of over £250k; monthly shopping bills of £800 despite a freezer full of food, etc. She & her husband earn well over £60k between them but they don't have any spare money) - they've got three kids and this was a one-off to help her with Christmas. Unfortunately, she's deaf to financial advice, but I've found with some people, me included, that you can't make them change - they have to want to do it themselves.

All I can do it chip away at her every time I see her: I tell her how I'm clearing my debts/getting the best deals and how getting in control of my finances as freed me. I hope that my enthusiasm for my own situation will one day make her realise that she can help herself as well.

This is how my brother got to me, and he now says I'm "tenacious" in my approach to debt clearance! We're both converts to the MSE way and we preach by chipping away to anyone who's in our company! The thing I've learnt from all this is that a lot of people are in debt, but they're too ashamed to admit it. I know I was, and when I opened up to my brother about the total amount of my debt it was huge relief to have it in the open. Like you guys on here he didn't judge, but is really supportive. I try to take that philosophy away with me and have found that if I'm open about my debts and how I'm tackling them, my friends are open about theirs and they're really interested in how I'm doing. I hope it gives them the encouragement to face up to any debts they have and tackle them head on.

I remember reading years ago that money can be your friend and I never believed it because what kind of friend would keep you awake with worry all night? Now that I've learned to respect money and see how you can work with it, I'm buzzing!! I can honestly say (and I do to my over-spending friends) that I get more of a kick out of chipping away at a debt than I ever did from buying the latest Clinique/Clarins beauty products - and the bags under my eyes have gone - not because of the latest wonder cream, but because I'm finally in control and can sleep at night!

Sorry - went on a bit there, but once I'm on a roll about the value of MSE, I can't stop!!