What to pay next??

busymummyof2

Hi


Have been lurking around here for a while, and trying hard to repay my debts since October, have managed about £5k so far. Aiming to be debt free in 2years so we may have a chance of re-mortgaging and buying our home.


Finally have all my credit card debt on 0% until next year at some point.


I also still have a loan with NatWest at an apr of 10%.
I don't know whether to focus my over payments to it (but there are early repayment charges of 2 months interest for each over payment), save my overpayments in a savings account (and pay to credit cards as 0% runs out) or just to continue over paying the credit card on which the 0% runs out first.


thanks

[Deleted User]

Run all the debts through the Snowball Calculator.

That will give you the cheapest way to pay them off.

Bear in mind, to get a precise picture, you will need the dates when each CC stops being 0%, and the APR each will go to.

longtermplanner

Bedsit Bob has described how do do this the most efficient way.

However, you have chosen as your user name busymummyof2. You may want to think about which option is going to be the easiest for you. Clearing all your debts in 2 years is going to be quite an achievement!

The loan is busy paying itself off. The debts that are going to need work are the credit cards which will need refinancing where the 0%s run out, unless you can clear them on a rolling basis.

What I would do is work out what monthly payments i would need to clear the first expiring 0% and start making those. Yes you could get a couple of % if you save up the money in a savings account. But it's hardly worth the hassle is it? There is a lot to be said for a simple and guaranteed route to debt clearing, even if its not the most efficient.

busymummyof2

Thanks for both your replies.


Had a look at the snowballing calculator. It didn't seem to take into account the extra I would pay to the loan for paying early.


longtermplanner I think your right about the loan, I'm happy with the payment and know when it'll be paid off (Nov 2016). Although I'm busy think I'll continue to pay the minimum payments and transfer the extra amount to a savings account ready to make lump sum payments as the 0% run out. I don't think I'll save much but the extra pounds earned are better off in my account than the banks. Only possible due to online banking though!!


One more thing - is it better for credit rating/files to pay slightly over the minimum??

sourcrates

busymummyof2 wrote: »

One more thing - is it better for credit rating/files to pay slightly over the minimum??

Only gets recorded as either up to date, or late, so as long as you make a minimum payment, any amount over and above is not recorded so wont benefit you in that sense.

giblet1979

I'm not sure how true it is, but I was told it can look good if you make a lump sum payment (as long as everything else is up to date and paid on time etc).

My last consolidation loan (for home improvements and the last of my debt at a higher interest) was 3% lower interest over the life of the loan if I took out a higher amount. I did that, then paid the extra off immediately (no penalty) leaving me with the same amount at a lower interest. The bank advisor explained that making a large overpayment can be beneficial with some lenders.
As long as you wouldn't be tempted to spend the saved money, and remember to pay off before the 0% disappears, it should be fine. I think some people feel more motivated seeing the balance going down each month, but seeing savings going up is great too

Hope this helps and good luck with everything,

Gib x