Advice needed for a newbie :)

Positive_Thinking

Hi everyone.

I have several debts that I am currently repaying - at the moment all on minimum payments. I am trying to work out what is the best order to repay them - I know logically I should do it by order of highest interest rate first, but psychologically I am drawn to paying them in order of the lowest balance first so as to reduce the number of creditors.

Current debts are as follows:-

1st credit card - £8,100.00
Store card - £600.94
2nd credit card - £392.98
Catalogue - £264.55

I also have a loan which should end in January 2017. The catalogue is interest free although the payments are quite high at approximately £90.00 per month. Minimum payment on the 1st credit card is £203.00 per month, 2nd card is £15.00 per month and store card is £20.00 per month.

Going at £90.00 per month the last payment for the catalogue will be in September. That will then obviously free up £90.00 to repay one of the other debts but I can't decide which one first!

Any advice would be appreciated

fatbelly

Overpay the highest apr card first. Likely to be the store card but you need to check.

If you can transfer some of this to 0% that would help.

http://www.moneysavingexpert.com/credit-cards/best-0-credit-cards

Pollygarter

Yes, I shifted all my credit card debt onto 0% deals at the advice of the good people here.

Have found it has two very useful effects.

The first is the obvious. You're not paying out interest so more money to throw at the debt itself.

The second is it increases the will to clear the debt before the end of the interest free period.

It's hard work,mostly really good enjoyable work and I am plugging away at mine and should be cleared before I have to pay a penny interest more.

That's my goal. Not to hand over another penny of hard earned cash to someone taking advantage of my inability to cut my cloth according to my budget.

Good luck!

Positive_Thinking

Thank you both, unfortunately my credit rating is not brilliant and transferring to 0% card isn't an option at the moment, plus I've recently moved home and not sure if that would be an issue if I haven't lived at this address for long.

andyfromotley

Do what works for you.

Dave Ramsey advocates paying them off smallest to largest irrespective of their APRs. He is adamant that the psychological boost you get from paying them off far outweighs any gain on the interest saved.

Its horses for courses. As long as you are paying off your debt you're winning.

[Deleted User]

What are the APRs?

Digging_2

andyfromotley wrote: »

As long as you are paying off your debt you're winning.

:j Exactly! :T

Positive_Thinking

andyfromotley wrote: »

Do what works for you.

Dave Ramsey advocates paying them off smallest to largest irrespective of their APRs. He is adamant that the psychological boost you get from paying them off far outweighs any gain on the interest saved.

Its horses for courses. As long as you are paying off your debt you're winning.

This was my thinking. I'm quite an impatient person and like to see quick results, so I feel this way would be more beneficial to me in the long run. In theory I could have the two smallest debts paid off by January 2016

Positive_Thinking

Bedsit_Bob wrote: »

What are the APRs?

After digging out the latest statements the APR's are as follows:-

1st cc - 25.9%
2nd cc - 44.9% :eek:
store card - 23.9%
catalogue is interest free. Looking at that the second lowest debt is the highest interest rate so would make sense to get rid of that one first

[Deleted User]

Positive_Thinking wrote: »

Looking at that the second lowest debt is the highest interest rate so would make sense to get rid of that one first

Absolutely. That APR is eye-watering. :eek:

At your current £15 per month, that ~ £393 is going to take 80 months to clear, and cost £795 in interest.

Indeed, after interest added on, the next payment is taking just 59p off the balance.

I think you can see where I'm going with this.

If I were you, I'd throw every last penny you have, at clearing it down.

Merely doubling the payment to £30 per month, would have it cleared in 18 months, for just £132 in interest.

Tripling it, to £45 per month, would get it down to 11 months and £72 interest.

satchmo1

To really get the full picture, it would be useful that you post a Statement of Affairs (SoA). That way, forumites can suggest ways to cut costs in all areas of your financial life. If you find ways to cut your living costs, you can throw more at your debts.


Throw absolutely every penny at the debt with eye-wateringly 45% interest rate.