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Toonsy

Hi I think I'm finally in a position where I can start to make headway with my debts. This is not a new thing I've known for a long time that I need to pay it off but I've been in a position where I've trimmed everything I can just to tread water. However I've finally just managed to remortgage after falling into negative equity post financial crisis so this monthly saving is going to be my starting point.

The long and short is I've not missed any payments anywhere but I'm not really making much of a dent in the balances either as I'm paying the minimum payments (or just above) on everything.

Debt wise I've got 11800 on an MBNA card at 29.9%, 10500 on a Barclaycard at 6.9%, 2700 on a Halifax card at 29.9% and 1800 on a Tesco card at 16.9%. I've also got 18 months of a Tesco consolidation loan (I know!) left to pay which is 330 a month at 11.9%.

I knkw this may sound crazy but I made a post a whike back about small wins. By that I mean I can now save the cash to pay off the loan in roughly six months. This will then give me £600 a month to throw at the cards. I know it'll be cheaper to go with the higher APR first but I think starting off paying the loan off (while continuing with other payments in the interim) is not a bad way to start given thst I have such a high amount of unsecured debt.

Any thoughts?

bexster1975

Hi

Paying the loan off first is an error.

Have you looked at balance transfers? I doubt you'd be able to transfer it all, but any amount would put that debt to the bottom of the priority list.
If you are struggling, it is worth writing to cc companies requesting they freeze interest so you can clear the debt. step change or others can help with this.

A statement of affairs would help people here work out whether £27000 of unsecured debt plus a consolidation loan needs to be viewed as a crisis based on your income.

I'm not going to discuss the fact you already have a consolidation loan.

Get your position clear, then start tackling debt from most expensive onwards.

Bexster

AnotherJoe

It might be financially a poorer decision but there is a recognised strategy that involves paying off smaller debts first because psychologically the payee sees their number of debts shrinking, sees that as progress, and is more likely overall to continue paying down their debts, rather than struggling with a big overall number coming down slowly and giving up.

If that helps the OP then perhaps a modified version of what they propose, first get rid of the Tesco card, then the Halifax. Then review and see if they are now on track enough they can move to the better strategy of working on the MBNA. By then the Tesco loan will be gone anyway.

bexster1975

Either way, paying off the loan right now is an error. With 18 months at £330 per month it will be far from the smallest debt. Without more info further assistance is entirely theoretical.


Bexster

Toonsy

Hi guys thanks for the replies

This is what I meant by what AnotherJoe said because at the moment it would feel like I'm chucking money at debt and seeing no gain whereas if I can get a tangible 'win' by paying off say the loan it firstly feels like I'm making progress and secondly then gives me more disposable cash to throw at the rest therefore making progress feel quicker if you get me?

The debt itself in total is bad but I'm in the fortunate position of being able to afford to pay it albeit slowly. Perversely the MBNA card does reduce quite quickly as the payment is something like interest plus 2% of balance so while the payment itself is quite high it does at least clear a larger chunk as opposed to say Tesco which is interest each month plus £5.

Without doing an SOA (I'm off to a wedding shortly, not mine, as a guest lol) but roughly speaking ive got all household bills from mortgage to gas/elec to childcare and food down to Just over £1200 a month for a family of three and that gives me roughly £1200 'spare' after all food and bills of which I throw £1000 towards debt repayments with the other £200 being stashed into an emergency/present fund.

I do also get a lot of overtime but I used to rely on it and always felt it was dangerous so when I get it I pay it off somewhere but I don't count on it any longer as you never know it may be gone tomorrow. Also I base my bills on four week months but months where there are five Thursdays like this month I use the extra weeks wage to pay off other stuff. This month the catalogue got cleared with it. Additionally I used to live in my overdraft but that's clear now.

As for 0% cards I've tried some soft searches with no luck.

MerryGoRoundAvoider

You are paying a horrendous amount of interest every year. My pigeon maths works out that you are paying roughly 20% on average on about £25-30k of loans, which is £5-6k of interest.

If it were me, I'd try to move some of the most expensive debts onto 0% deals. If there are no 0% deals available to you, I'd try to move some of the expensive debts onto the cheaper debts (e.g increase Barclaycard and Tesco CC's, reduce MBNA and Halifax).

Personally I'd attack the Halifax one first, it's one of the smaller debts but it's one of the most expensive. It'll give you a psychological boost once it's clear.

Toonsy

Yeah that's the other option I was looking at. Then perhaps the Tesco one as they likely offer 0% deals so I can shift something onto them

enthusiasticsaver

It is totally illogical to pay off a loan charging 11.9% first rather than a credit card charging 29% interest. If you can move any of the cards to 0% then it would make sense to target the loan. As it stands though the Halifax and MBNA cards should be the priorities.

Toonsy

Ok thanks all for feedback having considered this I'll chuck all I can at Halifax which will give me a 'win' before clearing others

AnotherJoe

Good decision, gives you your "win" quicker, saves more interest, by the time you've paid the Halifax off the loan will be nearly done anyway, so move onto the next smallest card amount, and then the loan will be done by then, and you can focus on the biggies.

Angry_Bear

Have you used the snowball calculator? http://www.whatsthecost.com/snowball.aspx

It'll let you see what your quickest way is, and how much of an effect going for the "win" has. You can also use this as a bench to watch your projected debt free date come closer which can be a good motivational tool.