Debt - what to pay off first?

louhowarth

Hello

can anyone help? I'm in a position to start paying off my debt ( rather than just minimum payments) can anyOne advise if there's one I should be paying off quicker?

I have £650 per month to cover these debts.

£3600 arranged overdraft Natwest - paying about £60 per month in charges
£4600 credit card Natwest - minimum payments £120 per month
£2400 credit card Tesco - 0% balance transfer til May 2016

what would I be best trying to clear first? The 0% card? Or would it be better to show a concerted effort to reducing all 3?

Thanks in advance!

Sanctioned_Parts_List

The normal advice is to pay off the debt with the highest interest first (as you pay less off in the end).

Play with the snowball calculator at http://stoozing.com/calculator/snowball-calculator.php to see what difference it makes

lee111s

What are the interest rates of the OD and Natwest credit card?





Pay off the highest interest debt first (this is the one that is costing you the most money) and cover just more than the minimum on the others, even £5 more than the minimum looks infinitely better than just paying the minimum.

getmore4less

But make sure you factor in future changes in rate when snowballing.

Ballance transfers are not realy zero as each time you create a new one there are fees.


With £60 a month in fees that OD is over 20%

louhowarth

Yep - the overdraft has the biggest rate - 18.28% plus a £6 fee each month - so I'll be getting that one down every month from end of Jan. Looking at the snowballing document - I should be paying £500 towards that every month ( might just pay a tenner over the two minimum payments so £480 per month to look as if I'm paying a bit more towards them)

Sanctioned_Parts_List

Is there any reason to "look as if you're paying a bit more to them"?

It makes not a jot of difference to your credit score or credit worthiness. Plus any institution really interested will be able to see your balance of payments and realise you're snowballing whether you pay the minimum or just over.

Seems like you're paying additional interest on £20 out of some sort of misplaced expectation of gratitude from the other creditors. They don't care

louhowarth

No, no expectations of gratitude at all - it'd just make me feel a bit better I think

Sanctioned_Parts_List

Good enough for me! Carry on :beer: