Loan overpayments? Are they my best option?

StuC75

As the loan is within the last year this advise is quite wrong as a 'blanket statement'.. Most lenders will give the option as to whether you want to reduce the term & keep the payment the same, or reduce the payment and keep the original term..

OP needs to combine the affect of rates and amount left to pay \ monthly commitment..

The only benefit to paying the cards first is that it would be providing a lower credit utilisation figure - i.e. the Loan is being paid to zero, but credit cards give a owe x of y Total..

iancrt wrote: »

Forget paying off the loan. You have 47 months left, even if you paid £2000 on it tomorrow you payments will still be £132 a month. the savings are better but they come at the end.
Pay off your credits cards first. Each month the minimum payment lowers, but try to pay the same amount above the minimum and your weekly cash flow improves. As you gain more disposable money you can still play - but you will also be able to see how good it will be with no debt. This will mean you will find it easier to allocate more money to the cards and pay them quicker.
Don't start too big, I always started with minimum payment plus that months interest charges.
The game to play is making sure a months interest charged is less that the 'next months estimated interest' shown on the previous statement. If it is - your winning!

iancrt

StuC75 wrote: »

Most lenders will give the option as to whether you want to reduce the term & keep the payment the same, or reduce the payment and keep the original term..

True over the long term, but often this involves minimum amounts to be paid in a lump and admin charges or a committed amount paid each month - it is not flexible to be looked at on a month by month basis.
Even paying 2k off now still leaves over 2k at 25% - so all that work and its still the worst debt.
Once done its done - no way to re-direct that cash to deal with short term issues or something that changes in life.
Unless the Op really does have £2k spare cash to pay in and the willingness to look at the whole picture over the long term, which is not the impression they give, stick with the more flexible easy approach until committed. I think if there was a lump sum I would still advise paying off smaller debts to clear them - because it would simplify everything.

Its as much a head game as it is a maths game, possibly more so.
Start with easy stuff. Keep it flexible. Pay spare cash getting rid of debt, but only if you have spare cash. Committing an extra £50 to the loan means £50 less spare cash a month. Looks great when budgeting, and then your dog gets run-over and your handing over your V5 for a loan at 9000%

Even when the cc are paid and the OP no longer has an overdraft I wouldn't advise committing extra to the loan. Stick it in savings and when not used for 6 months - drop 3 months worth of savings onto the loan and repeat each 3 months. This maintains the flexibility.
The !!!!!! will hit the fan at some point (Murphy's Law), you do not want to have to get into more debt to deal with it!
Interest rates are irrelevant - until you have significantly less going out each month to what you have coming in only the payments matter. Only when you can pay everything each month, live comfortably and have plenty(reasonably plenty) of disposable cash should you start playing the interest game. In the OPs case it wont matter because by the time they are at this stage there will only be the loan left to attack.

Finally - as you have vaguely mentioned, they will have an empty CC they can start using for weekly shopping, fuel etc (stuff you normally buy) - paying it off each month. this will jump start getting rid of the overdraft (more salary left on bank throughout the month) and give him a better credit record.

All this is for the future though - my advice was what I would (did) do first.

Olie1988

Hello everybody, thanks again for all the advice! Certainly a lot to think about

I think you're probably right about the mind games are as important as the interest game... In as much as in the last 4/6 weeks, I have knocked £1k off my overdraft, and seeing that there does make me feel great. Despite it not really being my money, it feels great knowing I've 'saved' a grand, and that motivates me to keep going. If I put that on the loan, and as said, the payment were still the same each month, I think (due to my short sighted mentality) it would probably feel like the grand was 'gone', if that makes sense haha. I think being back at the bottom of my overraft would probably knock my motivation. At the moment I'm kind of enjoying saving money

Also like the idea of simplifying my situation, asin, as little sense as it may make, maybe pay the small Lloyds credit card to get that gone, just one less thing to put in future equations.

I'm gonna go and chuck another £100 on that right now actually haha.

Olie

Olie1988

Oh, while I'm here.. One thing that is troubling me is the £2100 MBNA card. The 0% runs out in Feb '15, should I be paying £150 odd a month off that, or just minimum payments and just deal with it when the 0% is up?

Cheers

dotdash79

I would do minimum + £1 and then look to do a balance transfer when that ends, the money you save can be used on the loan or other debts

Olie1988

Thanks for the reply, yes in an ideal world, but my credit rating is shot to death.. I don't think my rating will be good enough in Feb 2015 for another 0% card unfortunately

dotdash79

you'll be surprised as what 18 months of paying back and staying out of trouble can do to a credit rating.

Major killers are defaults and CCJs. Late payment markers in over 12 months matter less and less as they fall into the background.

Olie1988

This is it, I do have defaults on my account. It's a long story but EE are chasing me for £850 for a debt I can't justify paying. They sent me a phone I hadn't ordered, I didn't send it back within 14 days, now I'm locked into it and owe them nigh on a grand. Naturally that's a hard pill for me to swallow with the rest of this going on so it is effecting my credit rating.

I did also miss a payment on my credit card a few months ago, was a bit of a !!!! up on my part letting my balance get so low that the direct debit bounced. I did pay it the next day, but yeah, I signed up with Noddle to have a look and that missed payment was on there.

Taking that into account would you still advice me leaving the £2100 0% credit card, or should I start making payments?

dotdash79

A default for that hight will go against you with most cc companies. whats the follow on rate?

Have you gone down the rout of a complaint with EE?

Tixy

What is the APR after the 0% deal?

A snowball calculator will calculate where its best to target your additiona payments to (taking in to account a 0% deal and the APR when that ends).