What to pay off, advice needed

YORKSHIRELASS

Hi all

I have £5k to pay off a debt. My options are as follows:

1. Reduce my Barclays Mortgage Reserve. Current balance is £21k. This has to be cleared in 10 years time so I am paying £225 a month. Interest rate is currently 5%, borrowing limit is £34k.

2. Reduce my Halifax Credit Card. Low lifetime interest rate of 6.73%. Balance is £7k, if I reduced it to £2k I could probably clear this by the end of the year and cancel the card.

I also have a small balance on my Barclaycard on 0% which I am not too worried about.

Obviously the Mortgage Reserve is secured against my home but has a lower interest rate so the Halifax card seems the sensible option but am I missing anything?

Both options would reduce my outgoings by about £50 a month so no difference there.

DD265

Personally I'd want to clear the Halifax Credit Card but this will help to work out what the least costly approach is:

http://www.stoozing.com/calculator/snowball-calculator.php

redux

Is the mortgage allowed to temporarily go up?

How about combining £2000 from that with the £5000 to pay off the Halifax card now? And then don't cancel it, just use it for new spending and keep paying it off in full each month.

YORKSHIRELASS

redux wrote: »

Is the mortgage allowed to temporarily go up?

How about combining £2000 from that with the £5000 to pay off the Halifax card now? And then don't cancel it, just use it for new spending and keep paying it off in full each month.

Thanks. Yes, I could do this. Its just the psychology of seeing that balance of £21k increase that bothers me. Stupid I know because I owe £28k in total anyway.

Not thought about keeping the card to use it and pay it off in full each month so thanks for that idea.

redux

The 0% on the Barclaycard, can you do balance transfers at that, and for a decent amount of time?

If so you might as well transfer some of the Halifax balance to it for the time being, then only use a mortgage increase to clear the BC as the 0% ends.

Or once the Halifax is down low for a month or two, and a bit before the BC 0% ends, it might be possible to apply for another card with 2 or 3 years of 0% balance transfer, then clear the BC.

This isn't to increase borrowing overall, just have some of it at zero rate.

DigForVictory

DD265 wrote: »

Personally I'd want to clear the Halifax Credit Card but this will help to work out what the least costly approach is:

http://www.stoozing.com/calculator/snowball-calculator.php

^ This for me. Swipe the card then the put that towards the mortgage til the 0% expires but, always check with the calculator!

Well done making that 5K work!

symphonies

As redux suggested, not a bad idea to keep the Halifax for new spending. Just make sure you set up a DD to always pay in full. If you treat it like a debit card (only spend what you can afford, only buy items which you'd normally buy anyway, ect) it will help strengthen your credit history and show lenders you're using your card sensibly.

Personally, I feel it's a good idea to have at least one credit card these days - especially when buying online, booking tickets and hotel reservations and of course, car rental abroad. Some people say more and more companies are accepting debit cards but it's a good idea to have a back up credit card, just in case.

Good luck!

YORKSHIRELASS

redux wrote: »

The 0% on the Barclaycard, can you do balance transfers at that, and for a decent amount of time?

If so you might as well transfer some of the Halifax balance to it for the time being, then only use a mortgage increase to clear the BC as the 0% ends.

Thanks, of course if I balance transfer there will be a fee so I will need to factor that in. Barclaycard did send me a balance transfer offer but I cant remember the details. Will look at that.

I am thinking that if I reduce the Halifax to £2k then balance transfer that to Barclaycard that might be the way to do it. Then once the Halifax card is clear I can use it for groceries and petrol and set it up to pay in full each month. This way I might get a balance transfer offer from Halifax in the future which may be useful if things dont go according to plan.

Thanks for your help, it seems a bit clearer now!