Newbie looking to settle debt quicker advice needed

scotty78

Hi folks,

My Wife and I currently have HP on a Car and we have a loan. I am looking for ways to cut the debt and wipe out this out as quickly as possible.

Below are details of the 2 debts,

Tesco loan
Original Loan amount = £25,000
APR = 6.9%
Monthly = £494.70 (48 months remaining)
Total amount due £29,631 – Over the life of the loan this costs £4,631 in interest
Settlement as 4th July 2014 is £20,923.80 (valid for 30 days)

Car Loan
Original Loan amount = £7,500
APR = 13.2%
Monthly = £168.75 (41 months remaining)
Total amount due £10,375 – Over the life of the loan this costs £2,785 in interest
Settlement as 4th July 2014 is £5,872.81 (£5,704.61 after July)

Calculated monthly figure for both loans is £663.45 with a total debt of £26.796.61 outstanding.
*If both loans continue to be paid until the original remaining term ends the total payable amount in interest alone payable will be £7,416 over the next 4 years *
To pay of the debt as quickly as possible i am thinking of paying getting rid of the car and buying another cheap run around £1000 or so if it helps to get rid of this debt quicker. I was thinking about doing the following below,
Sell the Captiva to settle outstanding finance of £5872.81 clearing the loan completely. (Option to sell back to dealer or sell privately)
Pay £923, 80 to Tesco loan
Take out new Tesco loan for the amount of £20,000
APR = 6.3%
Monthly = £609.57 (36 months)
Total amount due £21,945 over 3 Years Over the life of the loan this costs £2,785 in interest

The car is worth approx £7k but assuming i was so sell it back to the dealer they will just settle the outstanding finance and have no return.
Does it makes sense to take out another loan or just overpay on the current existing Tesco loan ?

Any advice is appreciated

Forgot to add that we also have £2400 on an overdraft and £400 on another which we plan to chip away at.

scotty78

Anyone manage to point me in the best way forward ? Which would be the best way to start clearing this debt.

lozzy81

Hi, most people suggest the statement of affairs to see where you can make cut backs and over pay loans also they suggest using the snowball calculator so you can see if you were to over pay how much quicker it would be, have a look at some diaries for money saving ideas, I suggest Ninjasavingkat as she is amazing
Good luck

dancingfairy

Selling the car for the best price and using it to settle the highest interest debt makes sense.
What are you going to do for a car then? Is this care surplus to requirement or would you need a new car?
In terms of refinancing the tesco loan. I like the idea in theory but I'm not sure if you can have 2 loans with Tesco. You might have to apply somewhere else to take out a loan to settle the tesco one (also I'm not sure how easy it is to take out a loan to settle another loan). You might have to do something a bit circular like taking out a loan and getting the cash and then using the cash to pay off the other loan.
Do beaware that it will be looked at as if you owe 40k though (the first 20k from tesco plus the extra 20k you want). This is because they have no guarantee that you will use it to settle the outstanding loan. Even if you have settled the car finance, whilst this will improve your credit file you may find it takes a while before it has much of an impact.
df

runforlife

Have you got the £1000 to buy the 'run round' car? How will you finance that?

ellesbellesxxx

Forgive me for being confused as to why you need to take out another Tesco loan?Surely if you overpay your existing one, you will be cutting the interest down for 0.6% difference?