Do you send extra money to your debt if its on 0%?

chelseablue

I recently did a balance transfer so all debt apart from the mortgage is on 0%.


The balance is £4,800 0% for 41 months


I've set the direct debit up for £100, so at the end of the term they'll be a few hundred quid left that I'll pay off strait away.


My mortgage I'm overpaying by £300 - £400 a month


After overpaying the mortgage if there's any spare funds would it be wise to throw it at the card debt even though its 0%?


Just to bring the debt free date sooner than 41 months?


What do other people do?

allthe7s

Personally if its at 0% I would divide the total by the months and just make it so there was nothing to pay at the 41 month point but no I wouldnt throw loads at it to bring the date forward. Jmo x

BettyBones

I would put any spare money you have into a separate 'no touchy touchy' savings account. That would then give you a few options whilst also earning some interest. You could:

keep this 'spare' money as an emergency fund
keep it until you have enough saved to clear the balance and pay it off early
save it over the 41 months, pay off the last couple of hundred and then treat yourself with whatever's left

It all depends on your circumstances really. In my case, I would probably keep it as an emergency fund, earning me interest, for the full 41 months. If I already had a sizeable emergency fund though, I would probably just do as allthe7's suggests... divide the balance by 12 and set up a monthly DD for that amount.

zippygeorgeandben

I love the sound of a 'no touchy touchy' savings account. Sounds a lot more interesting than a 'fixed rate savings saver'

Exerbusi2

How much spare money are we talking?

If it's hundreds, then yes - I'd be paying more off the debt. If your spare money is the only money with which you have to have a little fun, then no - keep it safe.

Having a cash buffer is a good idea. I'm assuming you don't have that in place, but around a £1000 fund is appropriate in my experience. That should cover most minor emergencies pretty comfortably (boiler repair, car problems, washing machine replacement etc) and will save you from using debt to fund 'life'.

The sooner you can get yourself out of debt, the better. Just because you have 41 months at 0% doesn't mean you have to use them all. If you can get rid of your debt in say, 30 months you'll have a whole 11 months extra without debt, meaning you can start building your savings and investments!

chelseablue

Thank you all

I already have an emergency fund, so that's covered

In terms of figures I could hopefully have £100-£200 a month spare that I could send to the card

Windofchange

I hit this dilemma recently too. I have paid off all my expensive debt and the only credit I have now is the Virgin card which is 0% until 2019. Had a spare grand floating about but instead of putting it on the credit card I decided to start a shares and savings ISA with it. It isn't going to cost me anything more if I paid it off today or in two years, so there is no great rush for me. My plan is to trickle money onto it so it is done by end of this year - will be a few hundred a month. The rest of the money I'm going to have a bit of fun with, but most importantly try to build my ISA savings up.

I think for me it is more of a mental thing - I just want to be debt free so I am committed to clearing the remaining credit card quicker than I need to.

ani*fan

41 months is a long time to have a debt hanging over you, even if it is interest free. Like other people have said, overpaying the mortgage and saving up make sense financially, but psychologically you might want to be rid of it sooner.

The way you have it set up at the moment, you will still have £700 debt at the end of the 0% term. Not unmanageable, but if I were you I would change the direct debit to the debt from £100 to £118. That way it will all definitely be paid off at the end of the 0% period.

Your mortgage overpayments vary from £3-400 per month. I'm guessing that your mse efforts go here, depending how well you do each month with money saving. I think overpaying your mortgage is a great idea, but I might make it a fixed amount, say £300 per month, and any extra you manage to make or save gets paid towards the debt to bring the dfd forward.

It's all just whatever works for you, but I might be trying to keep some momentum in the challenge of paying off debt. The reward once it's paid off might be bigger mortgage overpayments, or whatever. You mentioned that you might have £1-200 per month to pay towards the debt. For every £118 extra you pay, you bring your debt free date forward by one month. With the extra cash you have and reduced mortgage overpayments you could easily cut the 41 month term in half, or make it even shorter still.

Best of luck with whatever you decide to do. And if you try something and it doesn't work for you, then just try something else.

Teacher2

Pay off your debt as early as you can manage so throw all your spare cash at the outstanding amount. Keep living as frugally as you can in the meantime and develop a prudent and careful lifestyle.

chelseablue

Thank you all.


Its on 2 different cards, I think what I'll do after overpaying the mortgage is any more spare money I'll send to the card with the lowest balance, which is £1,400.


Then when that's clear hit the remaining card until its gone.

Sportster

chelseablue wrote: »

I recently did a balance transfer so all debt apart from the mortgage is on 0%.


The balance is £4,800 0% for 41 months


I've set the direct debit up for £100, so at the end of the term they'll be a few hundred quid left that I'll pay off strait away.


My mortgage I'm overpaying by £300 - £400 a month


After overpaying the mortgage if there's any spare funds would it be wise to throw it at the card debt even though its 0%?


Just to bring the debt free date sooner than 41 months?


What do other people do?

If you're disciplined enough, then pay the minimum on the 0% credit card and save the difference into an ISA and earn some free money (i.e. Halifax CC is 1% minimum repayment, so you could start by paying £48 off the card in month 1 and putting £52 into your ISA) - any extra cash you can also put into the ISA - then you can use the ISA to clear off the credit card before the 0% runs out.

It's effectively stoozing, if you've no other debt then make the most of the 0% time and earn some interest elsewhere.