Best use of some money

jefflad

Hi,

Just a quick question that I'm wanting advice on.

I've a 0% credit card coming to an end and was planning on paying it off (£5.5k) and was all set to but I'm wondering if I should just transfer this money onto another 0% and throw the money at my mortgage (£100k @ 2.5% with 15 years left) or car payment (£250/month 9.9% 25 months left with a final payment of £6k)?

My new thinking is the car loan (higher interest) but I'm not sure if I should kill that amount of CC debt as we will be remortgaging in the summer and wonder what would reflect best on us to ensure we get the best possible deal. Does it make any difference where I reduce debt? from a loan that will expire in a couple of years or from a credit card who's debt could live with me for a lot longer and who knows how long 0% deals will be around for if interest rates rise as they are reported to?

Hope this makes sense but any questions just ask.

enjoyyourshoes

Can you pay off the £5.5K with savings in the future when the propose next 0% expires?

If so, pay off the car loan (ensure no penalty) continue to pay the £250 pm as well (if allowed)

Time it so the next 0% is paid off in full before you apply for remortgage etc.

Try to stop the spending especially on cards as they will affect how much you can borrow in the future.

fatrab

If you can get another 0% balance transfer deal with a high enough credit limit to transfer the full balance then I'd go for that option and pay off the car loan with your current cash. You're right to want to pay off the highest interest debt first.


Just don't make any more credit applications after that until you remortgage in the summer.

jefflad

Thanks both... So lets say I pay some of my capital off the car, balance transer to another 0% would my mortgage application be any worse off for paying off some of my car loan and not clearing a credit card. I don't think I could save the same amount again before my current mortgage deal is due to expire.

fatrab

It just makes more sense to reduce the balance with the highest interest first. If your car is on pcp I'm assuming you'll pay off the part that is financed (£6250? assuming 25 x £250) which will leave the balloon payment at the end of the deal in 2 years time (£6000)


If you have £5500 available just now that only leaves another £750 to pay off the financed portion of the pcp deal which I'm assuming you'll be able pay off before the summer saving you 2 years worth of interest? Have you requested a settlement figure for the car finance?


If you pay the credit card off, you'll have 1 less outgoing but in turn will pay more in interest in the long run.


How much surplus income do you have each month? Might be clearer for us to assess if you post an SOA


http://www.stoozing.com/calculator/soa.php

fatrab

When does your current mortgage deal expire?

jefflad

Thanks,

I'm going to pay the car and the remaining balance next month and have 2 years of 'interest free' and if the remortgage is an issue take it from there in August when it's due... A lot can happen in 6 months.

fatrab

I'd start to look at mortgage deals around 12-14 weeks before your deal ends, your current provider will most likely offer you a retention deal but best to have a back-up plan in place just incase they're not competitive.


I'm also re-mortgaging this year so I understand your concerns


Best wishes

jefflad

Wow that far... I usually spend a week before

Normally I wouldn't be too concerned but from what I've read, May could see a sizeable rise and who knows by August :-/

enthusiasticsaver

What is the LTV of the mortgage?

Based on the above information I would pay off the most expensive debt first which is the car loan although when you talk about a final payment is this PCP and do you have the option to repay early or will they ask for balloon payment early?

The amount you were paying on the loan you should use to repay the credit card. The lower overall debt you have when you come to remortgage the better.

theoretica

Remember there is usually a fee to transfer to another 0% so they can be a worse deal than they sound at first.