Pay highest interest or smallest debts

jk2447

Hi all

I'm after some practical advice from someone who's been in a similar situation if possible. I have a the below debts and wondered what my best plan of attack would be to get on the debt free roster. Tackle that loan or the 0% debts. My thoughts are that while the cards are 0%, if I can't clear them by the time they expire, I'll potentially have to pay a balance transfer fee, making me lean toward putting spare cash on the lower CC certainly. My Loan is a Halifax Clarity which I can't speak highly enough of as any over payment causes an online message showing how much interest I've saved. I recently overpaid £80 and was told I'd saved £24 in interest. There are also zero fee's to over pay any of it!

£1,153.27 0% card until May 2016, min payment £16
£5,449.57 0% card until May 2017, min payment £125
£6,825 3.9% Loan, 83 months remaining, monthly payment £95
£301 0% Loan until Jan 2017, monthly payment £16.75

Total debts of £13,728.95. Any help would be very much appreciated.

Cheers
JK2447

andyfromotley

Hi Jk,

your goal is to avoid interest. If you are as happy as you can be that you will be able to resign the cards onto other 0% deals (which are never guaranteed obviously) then you should pay down the loan.

If there is any danger that you will ever be in the situation that some of the CC will end up at a normal CC APR. You should pay down the CC.

Given your super low rate on the loan its not absolutely critical as you aren't paying huge amounts in interest.

Me, id clear the CC's. Occasionally, like back in 2008/9 the 0% CC roundabout can come to a shuddering halt and 7k at 17% plus will turn out to be quite painful.

Equally i am also a fan of the dave ramsey method which says pay of your smallest first as this gives huge psychological reward for your efforts. It may not be mathematically the best, but if we were great at that we probably wouldn't have ended up with debts in the first place.

Neither option stinks as long as you are paying it down early.

jk2447

Thank you Andy, that's great advice mate. I might aim to get rid of my 300 loan and the lesser of the cards for a psychological boost then dedicate more to the loan for the heart and head mix. Thank you very much appreciated sir, JK

redux

How about you put any surplus into a couple of those bank accounts paying decent interest and make the decision later?

TSB 5% on up to £2000, Nationwide 5% on up to £2500 one year only, Club Lloyds 4% on up to £5000. One or two regular monthly savings accounts. With recent changes there should be no tax due on the interest. You'd need to set up regular payments into some of these, by transferring around between them.

Then when the zero interest deals come to an end you can review how fast you are going, and whether you can find any more at 0%

I don't think there's any point in paying the £300 loan early.

jk2447

redux wrote: »

How about you put any surplus into a couple of those bank accounts paying decent interest and make the decision later?

TSB 5% on up to £2000, Nationwide 5% on up to £2500 one year only, Club Lloyds 4% on up to £5000. One or two regular monthly savings accounts. With recent changes there should be no tax due on the interest. You'd need to set up regular payments into some of these, by transferring around between them.

Then when the zero interest deals come to an end you can review how fast you are going, and whether you can find any more at 0%

I don't think there's any point in paying the £300 loan early.

Hi Redux, I had no idea I could get those kinds of rates. I'll check those out now mate. If so I could ofset any interest even further. Thank you, great advice, assuming I am eligible for those rates. If I can get that I'll pile all of my spare cash into savings instead. I have zero contingency fund right now so could hit two birds with one stone with your approach

redux

Yes, it is surprising that those rates are available, and on current accounts. See some threads in the savings section here.

You could be earning as much back as the loan interest, maybe even slightly more, and hedging to stay flexible about when to repay it.

jk2447

redux wrote: »

Yes, it is surprising that those rates are available, and on current accounts. See some threads in the savings section here.

You could be earning as much back as the loan interest, maybe even slightly more, and hedging to stay flexible about when to repay it.

Just opened a TSB current account. Thanks again