Should I use my savings to pay off debt?

DKelly

Dear MSE

I will shortly be coming into some money (around 10K), my husband and I have a few debts totalling around £5K and I don't know whether to use the money to pay off the debt, mainly credit cards.
I had planned to drip feed the money to myself on a monthly basis as I have just started a new job with a lesser salary than my previous job so I was used to a certain level of income. Just unsure of what to do for the best.
Thanks

fruitisbad

are you paying interest on the debt?

Why not pay it off and 'drip feed' yourself what you would have been paying on the debts.

darrensurrey

The interest on the £10k will be less than the interest you pay on the £5k surely? I'd pay off the debt in its entirety if possible. Or at least most of it. Sometimes, it might make more sense to have a little debt, depending on clauses.

HappyMJ

kellydale wrote: »

Dear MSE

I will shortly be coming into some money (around 10K), my husband and I have a few debts totalling around £5K and I don't know whether to use the money to pay off the debt, mainly credit cards.
I had planned to drip feed the money to myself on a monthly basis as I have just started a new job with a lesser salary than my previous job so I was used to a certain level of income. Just unsure of what to do for the best.
Thanks

It makes sense to have emergency savings but as your debt is on credit cards if you do pay them off in almost all cases you can, in case of emergency, use them again to meet an unexpected expense which is exactly what they are intended for.

I would pay off credit cards ASAP.

I would save rather than pay extra off the mortgage. You can usually save at rates of interest that are very similar or exceed the rate charged on your mortgage.

mangle101

As stated above, pay off the debt. May also help to understand how the debt accumulated in the first place & now you're on a lesser wage what can you do to prevent it from reoccurring, post a SOA for people to help you reduce your outgoings.

DKelly

Yes the debt is on credit cards however all at 0%.
I understand it might be useful to keep a little debt and keep the repayments going for credit score reasons althought I've never had any issues in the past.
I can alter the drip feed amounts and I do like the idea of having no debt just struggling with the idea of not having enough per month as I'm used to.

Smodlet

Should you use your savings to pay off debt, hmmm... heck, yeah!

All that unused credit on your cards would make your credit record look good BUT you need to take a good look at some of the other boards to see if you can make any savings/cut back on spending and do your best to live within your new, straitened means. If you are planning to supplement your income from your savings, what happens when they run out? I.M.O. you should be hearing alarm bells right now, but for the fact you are here and asking for advice.

Check you out, you have the means to go straight to the Debt Free Roll of Honour:) Some of us doubt we will ever get there. You can be debt-free and still have savings for emergencies, if you manage not to drip feed them away. Sounds like heaven to me.

tori.k

If you have more than 12 months to run on the 0% it would be worth drip feeding it into a couple of high interest regular savings account.

ReadingTim

Unless your salary in the new job is going to rise to the level of the previous salary/job, drip feeding yourself the difference just means you're going to fritter away £5k on general living, leaving you nothing to show for it, plus the problem of living beyond your means when the money runs out.

Suggest you stick the lot into a high interest current account and repay each debt off over its remaining 0% interest free period, and while you're doing that, get used to living on less coming in - otherwise the debt will simply rise again, you'll have wasted £10k and have very little to show for it.

redpete

kellydale wrote: »

just struggling with the idea of not having enough per month as I'm used to.

That's a dangerous attitude, far better to face up to your change in circumstances and spend accordingly. What happens when the windfall dries up - build up even more debt because you still can't face reality?