Should I pay off my Debt with my Savings

ehdx

Hi Everyone,


I'm looking for some opinions/advice from people other than my Mum.


I'm 21 years old and have 17k debt. Believe it or not I have nothing to show for this. It started when I was 18 years old and got accepted for a credit card and things spiralled out of control from there.


I am very fortunate to have 52k in a fixed termed bond. It's been in there for 3 years and I do not have access to it. The bond matures this month and before putting it back into another bond (it seems like the best thing to do so that I can't get my hands on it and spend it) I want to know whether or not I should pay off my debt.


My Mum has been very involved in what I should do with this money. I was inherited it when a family member died and although my Mum only wants the best for me, she is very controlling when it comes to the money and doesn't want me to pay off my debt with it. She says that I'll be wasting the money by paying off my debt and that I should put all the savings back into a fixed term bond.


The problem is, I'm struggling to get by each month as I have so much money to pay back to creditors. On the other hand, my Mum's words have really got into my head and I feel as though I will be wasting so much money just paying my debt off and making a huge chunk in my savings.


My savings will be used, eventually, as a deposit for either a house or flat. I know that I need as much money as possible for a deposit and I also know how difficult it will be for me to get a mortgage. (If I'm applying for a smaller mortgage I may have more chance as I don't earn a great deal of money)


On top of this, living with my Mum is very difficult, so the sooner I can get a mortgage and move out the better...... which only adds to my trouble of needing as much savings as possible and needing to pay off my debt to even be able to afford a mortgage.




I would really appreciate if someone could give some advice on what they might do in the situation/ what financially is the best thing to do.


Thank you!

ViolaLass

Is the interest rate on the cards greater than the interest rate on the bond? (probably is but check)

If so, pay it off.

In any case, it's your money, not your mother's, and you are an adult.

TrickyDicky101

Are you being charged interest on any of your debts? If so, what is/are the rates of interest you are paying? If the interest rates charged exceed the interest earned on your investments then it makes absolute sense to use the investments to pay down the debt (or at least the part of it where interest paid exceeds earned).

ehdx

TrickyDicky101 wrote: »

Are you being charged interest on any of your debts? If so, what is/are the rates of interest you are paying? If the interest rates charged exceed the interest earned on your investments then it makes absolute sense to use the investments to pay down the debt (or at least the part of it where interest paid exceeds earned).

I requested an early settlement figure for my loan and I'd get a 1k rebate.
The cards are currently 0% interest but I won't be able to pay them off before the interest starts.

PeacefulWaters

I'd pay off the debt.

But how likely are you to build up new debts?

ehdx

PeacefulWaters wrote: »

I'd pay off the debt.

But how likely are you to build up new debts?

Hopefully I will have learnt my lesson.

pjcox2005

ehdx wrote: »

Hopefully I will have learnt my lesson.

It is your money but I can understand your mum's reservations as a quick fix by paying off the debt often leads to more being taken out as the underlying problem isn't solved.


If the debt is on 0% then use the period of time that offer applies for to take stock. For this period, put the £52k in an account you can access if you really had to rather than locking it away (apart from £4k into a LISA). I then draw up a budget for yourself and live to that for 6 months making repayments on the debt and showing you've got it all under control.


If you're reducing it and living within your means, then pay off the debt as the 0% offer expires with the savings held. If the debt is still increasing then don't as you'll waste the money.


If you are looking to buy a house then I'd start putting the money each tax year into LISA so you maximise that and get the 25% uplift.

cjmillsnun

Pay down the debt. Without question. Then set a budget based on you income so that you know how much you have after any outgoings and keep to it. Once the 0% expires you will have rates on the cards that will be far in excess of that gained by saving.

Your mum is wrong on this one.

System

ehdx wrote: »

Hi Everyone,


I'm looking for some opinions/advice from people other than my Mum.


I'm 21 years old and have 17k debt. Believe it or not I have nothing to show for this. It started when I was 18 years old and got accepted for a credit card and things spiralled out of control from there.

Believe us we do believe it. Many of us if not most of us have done the same to some extent at that point in our lives. Don't beat yourself up about it, at least you've recognised you've a problem at an early enough stage.

I am very fortunate to have 52k in a fixed termed bond. It's been in there for 3 years and I do not have access to it. The bond matures this month and before putting it back into another bond (it seems like the best thing to do so that I can't get my hands on it and spend it) I want to know whether or not I should pay off my debt.

Absolutely 100%. Fresh start, clean slate.

My Mum has been very involved in what I should do with this money. I was inherited it when a family member died and although my Mum only wants the best for me, she is very controlling when it comes to the money and doesn't want me to pay off my debt with it. She says that I'll be wasting the money by paying off my debt and that I should put all the savings back into a fixed term bond.

You're 21, you're an adult - something parents need to be reminded of from time to time. I'm knocking on 50 and my mum still tries to be like that to me.:rotfl:

Given what you've posted in follow ups, she's wrong. In fact scrub that, she's wrong not just about this but about putting it all back into bonds as well. If you're wanting to buy a house you should put your max annual allowance in a LISA.

The problem is, I'm struggling to get by each month as I have so much money to pay back to creditors. On the other hand, my Mum's words have really got into my head and I feel as though I will be wasting so much money just paying my debt off and making a huge chunk in my savings.

If you can't pay it off by the end of the 0% then you'll be paying a hell of a lot more interest than the bonds will grow by. There is also the fact you are struggling. Point out to your dear mother that it is causing you untold stress, giving you sleepless nights and making you both ill and miserable.

On top of this, living with my Mum is very difficult, so the sooner I can get a mortgage and move out the better...... which only adds to my trouble of needing as much savings as possible and needing to pay off my debt to even be able to afford a mortgage.
I would really appreciate if someone could give some advice on what they might do in the situation/ what financially is the best thing to do.

Well you could point out that you're almost at the point of defaulting on repayments and then it doesn't matter how much money is in savings for a deposit because defaults and missed payments on your credit file will stop you getting a mortgage as well as other negative impacts.

Unfortunately this is one of those situations where you have to exert your authority to do what you feel is best with your money and by what you've said paying off your debt is. Your mother is likely to be upset about it but how long do you let her continue to run your life especially when it is having such a negative impact on your wellbeing? It is all well and good making your money work hardest for you by keeping it in savings if the return is more than interest on debt but not to the point you're stressing out about levels of debt.

Stand up to your mother, use the money to repay the debts. You can always replace it over time with the money you'll no longer be using to repay the debts.

Candyapple

£17K worth of debt in 3 years with nothing to show for it is huge. You really need to make sure that you have got to the bottom of what caused this debt in the first place. Were you spending to cure boredom/depression?

How much do flats sell for in the area you want to buy?

What is your annual salary?

Please list all credit card limits along with outstanding balances.

Do you have any other loans / overdraft / car finance etc?

Do you have any late payments / defaults / CCJs?

ehdx

Candyapple wrote: »

£17K worth of debt in 3 years with nothing to show for it is huge. You really need to make sure that you have got to the bottom of what caused this debt in the first place. Were you spending to cure boredom/depression?

How much do flats sell for in the area you want to buy?

What is your annual salary?

Please list all credit card limits along with outstanding balances.

Do you have any other loans / overdraft / car finance etc?

Do you have any late payments / defaults / CCJs?

I know, it's absolutely ridiculous. I suffer from Depression, it was at it's worst around 2 years ago and that was when things completely spiralled out of control. I'd buy something because it made me feel good and then I'd feel down again. However, looking in my room - I wouldn't be able to find 17k worth of stuff. I was also working at a very successful law firm at the time and wasn't getting paid much but was expected to go out and socialise on a regular basis. I think a lot of money was also spent on nights out/dinners etc.


A one bedroom studio flat in my area starts at £190,000 and that's for the worst parts that you wouldn't really want to live in unless you absolute had to. (I live in a London Borough)


Oh just to add to this complete disaster, I've also been withdrawing money from cards.


My annual salary is £23,300.


Loan - £10340.00
Barlcays CC - £3372.02 balance out of a £3400.00 limit
Tesco CC (1) - £2802.59 balance out of a £2800.00 limit
Tesco CC (2) - £650.00 balance out of a £1200.00 limit (currently what I'm living on until pay day)
Overdraft - £500 planned overdraft but I'm currently overdrawn by £700.
Very account -£200 on account


I think that is everything. My car was paid outright so only thing I pay for is Insurance which is about £60 a month.


With all of this, I've never missed a payment. although at the start of the year things were so bad that I wanted to declare myself bankrupt although I couldn't because of my savings..... I wrote to Lloyds to tell them my situation but they said the only time Fixed Bonds are released early are through Death. (Yes, I thought of that too)