What should I pay first?

darbydoo

Hi all. I'm after a bit of advice if I may.

I am now in a position to be able to save around £500 a month.

My goal is to sell my house, but I am in negative equity by around £10k. I'm not interested in buying another at this stage as we are considering emigrating, so I want to reduce any potential shortfall as much as possible.

Here's what I have:

I have a main mortgage with HSBC, which is £56k outstanding, tracker mortgage at just over 1% APR. No early repayment charges/ penalties for extra payments.

I then have a picture secured loan for £30k, which is around 9% APR (worst mistake of my life!). There aren't any penalties for lump sum payments as such, but any payment I make, it will be around 85% interest, so my monthly repayments aren't making much of a dent.

Finally I have an unsecured loan with Natwest for £6k at 9% APR. They charge 28 days interest on the extra payments.

So my question is, where am I best off throwing my money? I don't think it's the picture one as that will just be consumed by the interest, but not sure between the other two.

Or am I better off just saving the money and then using it to pay for any shortfall if and when that time comes?


Help!
:beer:

sourcrates

darbydoo wrote: »

Or am I better off just saving the money and then using it to pay for any shortfall if and when that time comes?


Help!
:beer:

Hi,
I would take the latter option, as otherwise you will be hit with loads of extra interest, you may also be able to save enough to pay off the unsecured loan early.

Idiophreak

Are you intending to have a blank slate before you emigrate?

If so, I'd go for the picture one first...it's highest interest and there isn't a penalty for early repayment...Yes, it sucks that you'll mainly be paying interest, but you're going to pay that interest one way or another...may as well do it quickly.

fatbelly

Idiophreak wrote: »

Are you intending to have a blank slate before you emigrate?

If so, I'd go for the picture one first...it's highest interest and there isn't a penalty for early repayment...Yes, it sucks that you'll mainly be paying interest, but you're going to pay that interest one way or another...may as well do it quickly.

Yes you're effectively making your money get 9% interest by doing that.

If you're fortunate, the general rise in house prices may also help you to get debt free before you leave

redpete

darbydoo wrote: »

I don't think it's the picture one as that will just be consumed by the interest, but not sure between the other two.

No, your standard payments cover all the interest you are paying, anything above the normal monthly payments will come straight off the capital and save you 9% interest on that lump sum straight away.

So I would pay off the high interest secured loan in preference to the low interest secured loan (the mortgage) and the unsecured loan.