Advice on what to pay first.....

yoshiyella

Hello everyone and thank you for taking the time to read and if possible leave advice :beer:

Here are my current debts and repayments:

Very - £1130 outstanding and £142 a month to pay for next 3 months and then drops to £70 a month from January.

Accumulation of small debts totaling £5500 and paying £150 a month (11 creditors, 9 of which have defaulted and due to go off report in next 2-3 years)

Welcome Finance - £2500 outstanding and £90 a month

Finally, The Car Finance Company - £4500 outstanding, £240 a month for next 21 months - no issues so far.

So overall paying back £620 a month at the moment. Now the Welcome Finance and the accumulated debts have all had interest frozen on them, Very has a small interest on that account and my Car Finance payment also pays some form of interest.

I am now in a fortunate position whereby I can afford to pay back pretty much £400 more a month and on top of this an extra payment of £500 in November. So my query is whom do I pay........

I assume best option is to pay the car finance company an extra £240 a month - thus ending the agreement in about a year early. The remaining £160 a month going on the Very account. This means that in a years time I will be saving £400 a month and would then have my new extra £400 a month on top which could then be used to pay off the other debts in 8 months.

However, as I have numerous defaults, I was wondering if it was in my long term (albeit expensive) interest to keep the car finance payment running for the next 21 months thus putting a positive on my credit file for the next 6 years and hitting my accumulated debts hard. The benefit of this is that they get cleared after 12 months, on top of this my Very account will be clear well before then which I would then use to hit Welcome Finance and apart from the Car Finance loan I would have no debts and therefore in 12-14 months time I would be able to start saving money and having a better standard of live as I will have about £630 a month not going on debts.

Of course I may have missed something or someone might have a better solution. I know that it is 999/1000 times better to pay off the ones with interest but with a whole picture I don't know what to do.

Again, thanks for any advice help especially after reading all my drivel! :rotfl:

matttye

What are the APRs for each debt?

Paying off the highest APR first will save you money in interest.

yoshiyella

matttye wrote: »

What are the APRs for each debt?

Paying off the highest APR first will save you money in interest.

To be honest I have no idea, the Very interest is about £30 a month on £1100 and my Car Finance was for a loan of £5500 with a total repayment of £8800 so £3300 interest over the 3 years. I do know and understand paying the car off first along with Very would save me money but I was thinking of the longer term benefits of keeping these payments and paying them on time as they are not delinquent or anything like that,

Tixy

If those car finance figures are correct then that appears to be an APR in the region of 33% - so very expensive.

I'd dig out your original finance paperwork to check the APR and the terms, and check what the situation is with making monthly overpayments.

I'd also check the APR on the paperwork for your very account so you can best decide how to utilise the extra funds you have.

yoshiyella

Tixy wrote: »

If those car finance figures are correct then that appears to be an APR in the region of 33% - so very expensive.

I'd dig out your original finance paperwork to check the APR and the terms, and check what the situation is with making monthly overpayments.

I'd also check the APR on the paperwork for your very account so you can best decide how to utilise the extra funds you have.

I assume though that the interest rate is high due to my shocking credit rating! I have already spoken to them and they said over payments are very welcome and of course that reduces the interest.

The interest is not my concern - it is more of whether or not keeping those accounts open and paid on time will benefit me long term wise (only in terms of mortgage) and by long term I mean in 6+ years from now. I know that comes at a cost but that is my punishment for being an idiot with money (though not all my fault - long story with creditors not dealing with my mum when I was in a coma for months following a car accident)

Thanks for your response and for Mattye's too

matttye

yoshiyella wrote: »

I assume though that the interest rate is high due to my shocking credit rating! I have already spoken to them and they said over payments are very welcome and of course that reduces the interest.

The interest is not my concern - it is more of whether or not keeping those accounts open and paid on time will benefit me long term wise (only in terms of mortgage) and by long term I mean in 6+ years from now. I know that comes at a cost but that is my punishment for being an idiot with money (though not all my fault - long story with creditors not dealing with my mum when I was in a coma for months following a car accident)

Thanks for your response and for Mattye's too

In 6+ years from now, even if defaults were added to those other accounts, they would be dropping off by then.

If your main concern is getting a mortgage in 6 years time, you should try to pay off as much of your debt as possible and the best way to do that is tackle whatever is charging you the most interest first.

I presume the defaulted accounts are not charging you interest?

You'll need a mortgage deposit and the best way to save that would be once you're debt free. if you have any savings now, I suggest you use that to clear some of your debt.

WifeandMummy

I have a VERY account and the APR is 44.9% I'm currently overpaying that one myself xxx

chevalier

I would suggest saving up the new money that you are getting. The reason being that you can then start to offer full and final settlement to the ones where they have defaulted you. As this will be only a percentage of the total owed, it should save you money.

Just a thought
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