£46,000 possibly more debt I want it gone..

nsl101

Hi All,

So this weekend I decided My contingency is now complete, and I can now start to focus on over payments on the First Direct Loan. Having been completely confused about how the interest is calculated and having read on here in replies to my posts that the interest is not "front loaded" I decided it was tie for some learning and education. Being the Guy who likes to ask why I ended up doing the following three things this week:
1) make a few small starts to over payment and see the impact of this on whats left to pay.
2) Ask for a Settlement Figure to see what it would cost me to settle the loan.
3) compare that figure to what I've paid and thus figure out what Id cleared off the capitol with the
regular payments.

Step 1 was the easy bit... So Im in the 1% challenge and I wanted to follow it to the letter, so I totaled up my debt and nominated my self for £37,000.00 at the time i thought its do-able and I would make a good head start when i sold a car for approx £6,000, and then got another lodger to rent my room out mon-Fri I would be more than capable of finding 1% of 37,000.00 (£370) appears I'm wrong... However I didn't do this because it was easy... So given that I've now sold the car and changed my plans to hold it in two accounts for contingency (this stops the need for more debt, fixing my problems at source) I have decided that I would now break down each 1% (£370) box into a further 1% bite size chunks ...

Enter the mini Gird - a 10 x 10 box grid printed from an excel spreadsheet with some simple formulas to calculate the value of each box as you work through the grid.

so my four simple rules...

Rule 1: everything Is bought on Monzo card... This is a prepayment card that has a "pot" saving system, this pays no interest but its like an envelope system for cash in an app on your phone... however they have a new feature called "Coin Jar" this is a round up system so I pay for my weeks shopping at Aldi for £15.43 (not uncommon now im really watching the pennies), once the transaction goes through Monzo will round it up to the nearest pound and place the difference into my Coin Jar Pot... Once it makes it to £3.70 (1% of £370) then I pull the money out the pot and transfer it directly to the loan via sort code and account number. Then I tick the Box on my mini grid.

Rule 2: If I can do it cheaper or negotiate it down then the difference goes into a box. E.g. My girlfriends a hairdresser, I cooked her tea and she cut my hair... That's normally a cost of just under £10 so I calculate to the nearest box tick off 3 boxes and £11.10 paid off the loan..

Rule 3: Sell some thing.. So this at the moment is odd junk laying about the house. I sold an item that I had owned for a long time that was no longer of interest to me to a chap on facebook for £100.00 - this may be subject to tax (capitol gains would mean it comes in on the allowance or could be considered income tax or such like :-( ) but my lady who does my books will help me with that but in short that's 7 boxes ticked unless i round it up to 8 (£103.00). I'll pay the tax when the estimation on the bill comes in from the lady who does my books... This will also be supplemented going forward each month by my new found buying and selling on ebay which will be subject to income tax any profit will be used to shrink the loan with over payments. However as i de-clutter i am continuing to sell stuff along the way.

Rule 4: Celebrate success... Once mini Grid is full Tick off the next box on the big 1% chart on the side of the fridge, print out next mini Grid and send in my result to the 1% challenge, update my signature and then, and only then go blow a few quid on a beer or two. Remembering of course to buy your beers on the Monzo card to trigger the round up to start off Rule 1 for the next chart...

So to cut a long story Short I am now 41 boxes completed on my first Mini Grid :j This Gives me a reason to do Step2 and phone up about the settlement Figure on the first direct loan.

Step 2 This was easier than the last one... I phoned First Direct from my app and as Always I got an answer and got through to someone who was very friendly and helpful she gave me the settlement figure of £35,365.96 - Great I thought thanked her for her help and noted the figure down and carried on with my day...

Step 3 I thought about it and realised that I borrowed 35,700.00 and I've managed since December to reduce the settlement figure down by £334.04 So then I was left confused and it got to me I didn't understand how they arrived at the figure...

How Could I plan my targets effectively if i cant see the impact and understand how that's happened? Do I gain more if i pay more in a month? should I pay it at the beginning of the month or at the end? Should i just pay when I have it? Is it making any difference to the interest at all? Whats the best way to get the most benefit of my £11.10 over payment?

Well put simply... I was just far to confused... So I phoned them... I politely asked them how the interest is worked out if its charged daily or... and I wanted to know proportionately how my of my regular payments actually helped reduce the capitol and if the same was true for over payments and how this would affect my overall term of the loan... In short the lady did not know herself but was very helpful in trying not only to answer me but to give me the right answer... I am blown away with First Direct... Having gone from being told any over payments will just pay off the interest first then the capitol.. they have managed to correct themselves and say quite simply a larger amount of the payment goes towards the interest and the rest goes on the capitol this then reduces as the time goes on through the loan so towards the end of the loan your paying more capitol than interest, this now matches what I would know of fixed payments and feels much better in my mind, that making an over payment does help reduce the amount of interest payed, even though its calculated up front and added to the balance you see in the app. So ... we arrived at... I now have a direct dial number for the loans team, and someone I can ask for with her extension and the days of the week shes working... this was all offered to me without me complaining or winging... all ive done is ask how and why.. and as a bonus they are sending me an amortization report, which will give me more information on just how much of my payments go on interest... and I've been asked to call back and ask to speak to the Lady so she can learn this info too... at that point i will get my updated settlement figure as well.

So you might ask why... well why not... I am keen to learn as much as i can about the Loan so I can work hard and reduce it as soon as is possible with the means I have available.

My next plan is to figure out how to buy out of my Vodaphone contracts and divert the funds I would have spent monthly on them into this loan... this is a possible £100 a month of resource. Considering using some contingency fund to buy out, selling some handsets to recoup the contingency fund, but that will be my next post once I've worked out all the facts and figures for the various contracts I have... I know my son is eager to set up his own pay as you go phone.. and one of these contracts is his so i figure that is a good place to start...

Anyhow... here is my status... and signature updated... I figure i should provide this whenever i post to keep me spotted.
Debt at 19/03/2017: £45,150.51 - Includes interest for full term of loan - but excludes Mortgage

nsl101

Not posted in a while but I am still going, got my house insurance quote through and realised i am paying 8% interest paying it monthly, so that's going to be paid upfront. Then the monthly amount will be aded to my pots system that provisions for next years insurance.

I updated my signature in January but didn't get round to posting. but in short. my update was..
Status at 02/01/2019: £33,307.85 | FD Loan: £4,289.30/£35,700.00 | O% finance: £1,897.15/£3191.80

Basically since I re-started this process in dec 2017 the debt has gone down by £13,199.09, that is 16 months of learning and making changes each week, however small. I am considering another change to my plan to help accelerate things, however tomorrow I want to get a balance on my FD loan and do a new signature update to reflect accurately the progress, so i will post tomorrow.

More debt repayment coming soon.

enthusiasticsaver

It looks like you have got to grips with budgeting and living within your income but it also appears you have taken more debt out since consolidation, albeit at 0%. Is that correct? This is a classic error which comes with consolidating debt which we hardly ever recommend although I would have to say you do appear to have changed your spending habits so that is good.

Well done on changing to paying the house insurance yearly. It is always cheaper that way. Same with car insurance.

Lancashirelass1

Hi, I'll keep you in my saved. Well done. Get loads of advice on here, they are like the avengers of debt thrashing, really down to earth people too, you sound like you're making really positive changes for yourself, looked at risks, checked out the longer term plan too, which is critical for your goals.
Keep posting and reading others, I've had loads of advice. I'd say though, keep a journal, or notepad on your phone to keep a proper check on what you're spending. My spending diary at first showed me exactly what I cared about the most, I spent my money on the little trips to fill up on petrol, going to boots, lunches, coffee shop etc.
The one thing I couldn't give up now is my diary, it wasn't good to keep it in my head. Written down was better and more accountable to myself. Also, getting my bank statements over 6 months and sitting there and working out exactly what I'm spending on rubbish was very painful, but I could see where I needed to make changes too.
Gosh that was hard, the amount of money wasted on various things amounted to a lot of money!! Ouch!!!

Brilliant post, keep at it, stay positive.
LL.

nsl101

enthusiasticsaver wrote: »

It looks like you have got to grips with budgeting and living within your income but it also appears you have taken more debt out since consolidation, albeit at 0%. Is that correct? This is a classic error which comes with consolidating debt which we hardly ever recommend although I would have to say you do appear to have changed your spending habits so that is good.

Well done on changing to paying the house insurance yearly. It is always cheaper that way. Same with car insurance.

Hi Enthusiasticsaver,

No this is not new borrowing, this O% loan is in fact the only loan i didn't consolidate, it was a sofa loan that was my last stupid decision before sorting this mess out. I decided when i consolidated to leave it as it was 0% over a fixed term and it was not costing me anymore to keep at the time. However I had enough to settle it and as i am due to remortgage soon i have taken the decision to pay it down completely to free up some cash flow in case i need to remortgage this will help my affordability.

I hope this helps.

nsl101

Quick update, i have managed to get an up to date balance on the first direct loan. It is now at £29.623.32 for a settlement figure, I have also ordered a full amortisation report so i can see the effect the over payments are having on the compounded interest. As i paid off the 0% finance the payment that was going to that loan is now being directed into this one as an over payment, ive also managed to up it in value so its a fixed 10% over payment monthly, this should help reduce the capital this does not replace the beer money over payments I have been making until now. in short I have the mini charts still going I've completed 5 of them each mini chart is £370.00 over payment, I will keep going on this method an see what a dent i can make over the next month or so.

I still need to sort out the insurances that is a job for Monday.

I am also considering looking for cheaper fibre broadband currently paying £52.49 a month for it.

Also moved the emergency fund and my savings pot from Tesco accounts to a Marcus account, just to maximise on that passive interest, a few quid makes me feel so much better lol..

anyway update to the signature today is:
Status at 12/05/2019: £29,623.32 | FD Loan: £6,076.68/£35,700.00 | O% finance: £3191.80/£3191.80