Which debts do I pay off first?!

davidevans123

Hi,

I am hoping someone can help.

I have run up a few debts over the years but I am very lucky to be in a position to pay some of it off. My debts are as follows:

Lloyds (opened May 2015) : £24000.00 left (Payment : £680.00 p/m) 4.5 years left.
Barclaycard (opened May 2014) : £8500.00 (Payment : £190.00 p/m)
AvantCredit Loan (opened Nov 2015) : £2300.00 left (Payment : £78.00 p/m) 4.5 years left.
Capital One (opened around 2003) : £2400.00 (Payment : £75.00 p/m)
Debenhams Store Card (opened 2014) : £450.00 (Payment : £16.00 p/m)
Capital One card 2 (opened March 2016) : £130.00 (Payment : £5.00 p/m).

I plan to pay off £18000.00 off my debts but dont know what debts to pay first! My priority is to decrease the amount I pay each month, so I am thinking of clearing my cards. What do you think?

Thanks

zenshi

List them again with relevant interest rates.....this will make it much clearer as to which one goes first

davidevans123

Thanks but that wont make any dffference as the Lloyds loan has a 24% interest rate, I pay £18k off that and my monthly payments wont go down as the only thing that would change is the term of the loan.

yasmin2

Do you have £18,000 now that you can pay off as a lump sum? Is that what you mean?

zenshi

If you have 18k now then clear all your cards. If you plan to chip away at them then the interest rates are relevant in helping you save the most money in paying them

nb0825

davidevans123 wrote: »

Hi,

I am hoping someone can help.

I have run up a few debts over the years but I am very lucky to be in a position to pay some of it off. My debts are as follows:

Lloyds (opened May 2015) : £24000.00 left (Payment : £680.00 p/m) 4.5 years left.
Barclaycard (opened May 2014) : £8500.00 (Payment : £190.00 p/m)
AvantCredit Loan (opened Nov 2015) : £2300.00 left (Payment : £78.00 p/m) 4.5 years left.
Capital One (opened around 2003) : £2400.00 (Payment : £75.00 p/m)
Debenhams Store Card (opened 2014) : £450.00 (Payment : £16.00 p/m)
Capital One card 2 (opened March 2016) : £130.00 (Payment : £5.00 p/m).

I plan to pay off £18000.00 off my debts but dont know what debts to pay first! My priority is to decrease the amount I pay each month, so I am thinking of clearing my cards. What do you think?

Thanks

Putting the interest rate would help us to help you

davidevans123

OK thank you and apologies guys.

Lloyds (opened May 2015) : £24000.00 left (Payment : £680.00 p/m) 4.5 years left. 24%
Barclaycard (opened May 2014) : £8500.00 (Payment : £190.00 p/m) 16.9%
AvantCredit Loan (opened Nov 2015) : £2300.00 left (Payment : £78.00 p/m) 4.5 years left 25%+.
Capital One (opened around 2003) : £2400.00 (Payment : £75.00 p/m) 16%
Debenhams Store Card (opened 2014) : £450.00 (Payment : £16.00 p/m) 24%
Capital One card 2 (opened March 2016) : £130.00 (Payment : £5.00 p/m). 29%

Hope this helps. Thank you

nkkingston

Always go for high interest before low interest, because it'll save you the most money in the long term. The snowball calculator can be very helpful here. If your primary concern is reducing monthly outgoings now, focus on the credit cards, from high to low, but if you want to be out of debt sooner, go for the loans.

I would maybe clear the Barclaycard, and use next month's money that would have gone on that to clear the Capital One 2 card. Clear the Debenhams and the Avantcredit loan too, then you can put the month from those onto the Capital One 1 card and clear that within a few months as well. Put the rest towards reducing the term of the Lloyds loan.

HappyMJ

davidevans123 wrote: »

OK thank you and apologies guys.

Lloyds (opened May 2015) : £24000.00 left (Payment : £680.00 p/m) 4.5 years left. 24%
Barclaycard (opened May 2014) : £8500.00 (Payment : £190.00 p/m) 16.9%
AvantCredit Loan (opened Nov 2015) : £2300.00 left (Payment : £78.00 p/m) 4.5 years left 25%+.
Capital One (opened around 2003) : £2400.00 (Payment : £75.00 p/m) 16%
Debenhams Store Card (opened 2014) : £450.00 (Payment : £16.00 p/m) 24%
Capital One card 2 (opened March 2016) : £130.00 (Payment : £5.00 p/m). 29%

Hope this helps. Thank you

If you clear the loans and cards with the highest interest rates off first you will save the most in interest.

Can you afford to pay £1,044 each and every month to your debts? Are you using the credit cards to meet a shortfall in your budget so you can maintain the minimum repayments each month on your loans?

I would be looking to refinance the remaining debt to get lower interest rates. However, you may not be able to. If you can't afford to pay all your bills and pay £1,044 every month I would be making calls to the credit providers to get the interest rates reduced or the terms extended. If that fails to achieve anything then I'd be looking towards getting on to a DMP, defaulting, freezing the interest and clearing the remaining debt within 5 years by making smaller affordable payments every month.

Even after paying a £18,000 lump sum off your debts you will still have some £19,780 outstanding.

If you do go down the DMP route you could choose to keep the £18,000 lump sum aside and use it to make full and final settlement offers after 6 months once all the debts have defaulted.

nb0825

davidevans123 wrote: »

OK thank you and apologies guys.

Lloyds (opened May 2015) : £24000.00 left (Payment : £680.00 p/m) 4.5 years left. 24%
Barclaycard (opened May 2014) : £8500.00 (Payment : £190.00 p/m) 16.9%
AvantCredit Loan (opened Nov 2015) : £2300.00 left (Payment : £78.00 p/m) 4.5 years left 25%+.
Capital One (opened around 2003) : £2400.00 (Payment : £75.00 p/m) 16%
Debenhams Store Card (opened 2014) : £450.00 (Payment : £16.00 p/m) 24%
Capital One card 2 (opened March 2016) : £130.00 (Payment : £5.00 p/m). 29%

Hope this helps. Thank you

Barclaycard and capital one can be balance transferred to 0% cards, see the eligibility checker for the best deals. Make sure you avoid deals that have a balance transfer fee and go for purely 0% (will last for around 20 months). Repeat once 20 months is over.

Clear debts in this order

1. AvantCredit
2. Debenhams Store
3. Lloyds

Seeing as you won't have enough to clear the Lloyds debt, apply for money transfer offers (again, see eligibility checker).

engineer_amy

davidevans123 wrote: »

Thanks but that wont make any dffference as the Lloyds loan has a 24% interest rate, I pay £18k off that and my monthly payments wont go down as the only thing that would change is the term of the loan.

Yes but you will pay significantly less interest over the life of the loan by paying it off sooner.
Start by finding out if you can make overpayments to the loans, or if there are any penalties for paying off earlier.
Then pay off in order of highest to lowest interest until your lump sum is gone.
My preference would be to get rid of the CapOne card 2 and Debenhams first, then the AdvantCredit Loan, that leaves £15120 (less any interest penalty from Advant) to pay towards the LLoyds loan.
This frees up an additional £99 per month to pay against either of the remaining cards or to Lloyds loan