"What to concentrate on first" advice please.

Ewe

Dear DFW-ers,

I currently have the following debts:

Loan: £5000 remaining, 7.9% apr, £90.25 p/m (55 months to go)
CC1: £1900 0% apr till May 2017
CC2: £1200 0% apr till April 2017

I am starting *another* fresh attempt at clearing my debts from today.

My prospective plan is:

• £100 per month on each card, allowing me to clear both cards before their interest free periods finish.
• £100 per month to start an emergency fund of £1,000.
• All other disposable income towards the loan, as this is the only debt I am paying interest on and there is no early repayment charge.

Does this seem logical? Or should the emergency fund / credit cards take priority?

Any advice appreciated.
Ewe

Cornucopia

If you can make over-payments on the Loan without penalty, then that should probably be the priority - by paying it off early, you will save real money.

You may also want to consider rolling over your CCs on to another 0% deal when they are coming to an end, and you won't be able to do that if you've paid them off.

EssexHebridean

With the cards at 0%, then I might be tempted to build the emergency fund first, "just in case" then start hammering at everything else. Once the amount you want as a starter is safely tucked away in an ISA then you have your head clear to think about the other stuff. That's just me though. Getting shot of a loan ahead of time can be a massive saver if there is no penalty for doing that.

You're right about planning to make sure you can kill the cards off ahead of the 0% finishing too as their rates will escalate to well over the loan rate if they go over that period.

Another thought - why not stash the money you'd be paying extra to the cards into the same ISA as your emergency fund for the time being? You can then pay the cards off as lump sums at the end, and you'll be earning interest on that cash in the meantime?

andyfromotley

This assumes that your credit history is good and that you will have no problem shifting your CC to another 0% when current one ends.

1. Minimum on everything until £1000 emergency fund in place.
2. Minimum on cards everything at Loan
3. Cards.

If you are unsure about your credit history ability to shift again then your current plan is fine.

Thats the logical answer. However if you struggle with sticking with plans long term then try this.
1. Emergency fund
2. Everything at smallest loan untill paid off.
3. Move onto next smallest.

This is the dave ramsey method. Yes you pay more in interest but he says that the enthusiam of actually getting rid of debts keeps you fired up. He thinks that most people hardly ever stick to the 'logical' method as they see no progress. I think he has a point.

henrik1971

Andyfrommotley - sorry to enquire, but I have noticed your posts here and there on the forum and I have always meant to ask - How did you pay around £11k off your debt in less than three months from your LBM?

If there's a trick I'm missing, I'd love to know!

sourcrates

henrik1971 wrote: »

Andyfrommotley - sorry to enquire, but I have noticed your posts here and there on the forum and I have always meant to ask - How did you pay around £11k off your debt in less than three months from your LBM?

If there's a trick I'm missing, I'd love to know!

Probebly robbed a bank lol 😆

Ewe

Thanks for the great advice all.

Good point about the emergency fund being No.1 priority - I'd hate to start tackling the loan only to have a disaster that meant using the cards again...!

My credit rating is good at the moment, I've never been late on any payments and always pay over the minimum so I'm fairly confident I'd be able to roll them over onto another deal when the time came.

I do have trouble sticking to plans so I think I'll need to actually pay money off the cards rather than save it, although I'll be sacrificing a bit of interest..

Thank so much everyone!

EssexHebridean

You can also kind of double up - by throwing everything into an ISA in the first instance, then in a lump at the loan/cards as and when needed, not only do you earn interest on it but you also have a "just in case" fund sitting there as well. Win/win?!

andyfromotley

henrik1971 wrote: »

Andyfrommotley - sorry to enquire, but I have noticed your posts here and there on the forum and I have always meant to ask - How did you pay around £11k off your debt in less than three months from your LBM?

If there's a trick I'm missing, I'd love to know!

Dead simple. Sell your beloved VW camper van and throw the money at the debts and buy a car! It also helps you save in other ways too as it will leave you so upset you dont feel like going out for a while!!!

EssexHebridean

andyfromotley wrote: »

Dead simple. Sell your beloved VW camper van and throw the money at the debts and buy a car! It also helps you save in other ways too as it will leave you so upset you dont feel like going out for a while!!!

Oh Andy that's really sad! I hope your first savings target once you're DF will be to buy another camper!

andyfromotley

EssexHebridean wrote: »

Oh Andy that's really sad! I hope your first savings target once you're DF will be to buy another camper!

Thanks EH, Yes it was sad, but it was precisely what i needed. As much as the money it raised it was a statement to myself that enough was enough. I was done with debt. I miss it, the kids miss it and if i had managed my finances better then i wouldnt have to have sold it. However i hadnt so boo hoo me.

I will buy and convert another one when i am debt free, it will be saved for, paid in cash, and will hopefully represent that i have come full circle.