Not sure of the best way to proceed

tiger1957

Hello


I've been a lurker here, posting only once in the 5 years I stumbled across the site, the advice I received was really helpful so I'm hoping someone can advise me as to the best way to proceed.
I have the following debts to be repaid
£2500 on a 3.7% Credit Card (paid down from £11,000 whoop whoop!), which charges 17.5% on new purchases
£10860 on a Refurbishment loan 6.5% 10 years to run
Two overdrafts, each at £1000


And the following assets
£4000 in savings
£100 in a loan from me that has been repaid
£1500 in overtime
and an income of (monthly take home) 2700


I will do a SOA, I'm logging everything I spend at the moment so I can complete it in best detail, but the main costs , the mortgage and loan and all fixed direct debits including car come to £1600 a month


My general question is as follows


How should I proceed in paying off debts with the assets I've listed above?
Should I throw everything at the highest rate of interest?
Should I clear the credit card although it is at a lower interest rate?
I need to do some further refurbishment work on the house prior to selling it (too big now children have moved out), I'm estimating from quotes that this would cost around £1500


My intention is once the work is done to sell the house and down size (I'm quite excited by this)both as its a change, and that I should have a very much smaller mortgage,( I currently have 50% equity in the house) and as a result I should be able to enjoy more experiences (holidays etc, helping family etc)


I have currently one mortgage for £99000 at 1.49% lifetime tracker - 12 years to go (yet I retire formally in 8 years)
One for 12,000 at 4.99, with 5.5 years to go


Every which way I look at the figures re paying debt back I get confused
Do I keep n emergency float?
Do I throw it at the second mortgage thus releasing that payment in a few less years
Do I pay the highest interest loan of first?


The reason Im asking for some kind of comments is that I have done all the usual nonsense "oh put it on the credit card", "oh I I really really NEED it", "oh Ill get a loan and roll all the debts up and then Ill be free" (yeah, right, free to keep spending on the cards the consolidation loan was meant to clear)
But I do genuinely think that I'm free from that mind set now, and more significantly free from that emotional state that was never solved by spending but somehow I thought it could be


I have savings and money coming in and I need to spend wisely
If anyone has "well I would" thoughts they could share Id be really grateful


Thanks

Bobarella

Hi Tiger
I suppose my first thought from reading your post is what is your most important aim? As you say you are already well underway with your repayments so what is the most pressing goal for you? The common advice is to have an emergency fund of £500 to £1000 just in case. This provides a buffer against the risk of sliding back into using credit again. So if it were me I'd them pay off the rest of the money to the debt.

I think yes post an SOA and people can pitch in with their thoughts.

Good luck with it all
Bob

enthusiasticsaver

If it were me I think I would start with using part of your savings to clear some of the debt and then use a proportion of your monthly disposable income to make overpayments in the following order.






The 2 Overdrafts (unless the interest rate is very low - you have not said what interest rate you are paying). Beware the ones where you pay a fixed amount every month or day you are overdrawn. When you work it out it is sometimes higher than you think.


Refurbishment Loan
Credit Card
Mortgage (The 4.99% bit first). Check if penalties for overpayments.


Keep some as an emergency fund - ideally 6 months outgoings but this might be a bit ambitious to try and build that up at the same time. A principle we used to use years ago was to divide our disposable income into 3, save 1/3, repay debt or mortgage 1/3 and spend 1/3. If you have £1100 spare each month you could overpay debt by £350, save £350 and have £400 to cover monthly expenditure.