wanting to clear debt but need guidance?

khampson

Hi I need help with the best way to clear my debt, I currently owe my father £2600 which I am paying back at £150 per month, he needs it back so I cant defer this payment and i dont pay interest on this. I also have £1400 on my halifax credit card at 11.9% apr. I can afford to pay back £30 per week on this, what is the best way to clear these payments?

Am I best to apply for a loan of £4000 and pay my father and my credit card off or just transfer the credit card to a 0% on balances transfered, seen thebarclays offering 31 months, however I may need to add to this for insurances or car breakdowns or food if I go over the £300 a month I have put to one side for these. So I can afford around £300 a month for any loans but £150 of that goes to my dad leaving another £150 per month for my current credit card plus any other spending that goes on it,

Your thoughts please
Thank you

[Deleted User]

If I understand you correctly, you have £150pm to put toward your CC, which has a balance of £1,400, and an APR of 11.9%.

At that rate, you will clear it in 10 months, at a cost of £61 in interest.

Transferring to a 0% card will cost you £42 (assuming the normal 3% fee), and it will still take you 10 months, at £150pm, to clear it.

Seems a lot of faffing about, to save £19.

Once the CC is cleared, you will still owe your father £1,600.

If you then added the £150pm, you are currently paying to the CC, to the £150pm to your father, it will take a further 6 months to clear that.

This means you will have cleared both the CC, and the loan from your father, in 16 months.

As to a £4,000 loan, what will the APR and repayment period be?

At 5% APR (how likely are you to qualify for 5%?), a £4,000 loan, paid at £300pm, would take 14 months to clear.

Again, it seems a lot of faffing about, for little gain.

Meatloaf1981

I would say stick to paying your credit card off at the current rate as Bedsit Bob mentioned, because the transfer fee makes it not worth your while if it is something you can pay off within a year. A loan is ultimately just as pointless as you'll likely have it for at least 12 months and pay back roughly the same amount, just would cost you less monthly. If you can afford the repayments, just cut your card up to stop you using it any further and make sure you keep making those £150 repayments to it and to your dad. In the meantime, start saving money to prevent you relying on credit in future for things you might want. Just make sure your repayments are affordable and realistic, then you'll be fine.

khampson

Think the apr is 7.1% and £123 per month over 3 years, but will allow over payment.

Thanks

khampson

I also though swapping it to a 31 month 0% apr I could drop the payments to £11 per week given me the option to save the additional £19 in a savings account.

Meatloaf1981

You could do those things but then you hold the debt for far longer and run the risk of adding to it as time goes on. It's a matter for you but my feeling would be to carry on paying the larger sum to get rid of it quicker and before you know it, you'll only being paying your dad off and the cost will be half what it is now. Discipline is what is needed here!

[Deleted User]

A loan at 7.1% APR, at £300pm, would take 14 months to clear, and cost £180 in interest.

That's £119 more, than if you continue to pay it as you are.

[Deleted User]

khampson wrote: »

I also though swapping it to a 31 month 0% apr I could drop the payments to £11 per week given me the option to save the additional £19 in a savings account.

You could, but do you want to drag out a 16 month repayment period, to 2.5 years, for the sake of a few quid in savings interest?

If I were you, I'd kill off the debts in 16 months, then I could put the whole £300pm into a savings account.

[Deleted User]

khampson wrote: »

Think the apr is 7.1% and £123 per month over 3 years, but will allow over payment.

£123.69pm to be exact.

As for the overpayments, after a few months, the temptation will be to spend the overpayment money on something else.

Trust me, I've been there.

Letting the loan run the full term, will cost you over £450 in interest.

Do yourself a favour, keep going as you are, and be rid of it all in 16 months.

khampson

I am happy to keep paying as I am but my only problem is I may need to add to it such as car insurance in May £300+ so is this still the best option, I could pay it monthly but will come out of the 300 I pay the debt off with but im sure the apr would be above 11.9%.

Thanks

chevalier

Rather than faff around (love that word Bob). How about setting yourself a challenge to raise the car insurance money from additional income. Eg selling broken gold, car booting, ebaying?
good luck
chev