Tidying up the mess

enthusiasticsaver

If you are going to be paying £1350 approx from March then the overdraft will be gone in 2 months so I would do that as overdrafts can be withdrawn at any time then the Santander as the deal runs out in December and will take 3 months to repay. That would be cleared in July. Then the MBNA and Barclaycard as that will take you a whopping 6 months to clear and they run out in February so not much leeway. I would leave the Hitachi loan to run its course and the Halifax and Lloyds 2 have 18 months before interest is charged so I would tackle those last. Just my thoughts though.

enthusiasticsaver

I can understand why Dave Ramsey says smallest to biggest debt as that helps motivate people who are struggling and as you say frees up payments. However the minimums on the Lloyds one must be very small and the Hitachi looks as if it is less than £50 but tackling those first means delaying those big debts to Santander and MBNA by at least a month. That looks tricky if you have a derailment in your plan.

Kitten868

I can see exactly what you mean. I would be tempted too. I have my eye on Lloyds on your list and then boom one less creditor in one month BUT only you know what is going to work for you. It's all well and good to say you can pay £1350 a month, it's another entirely to keep the motivation to keep paying. I'm very naughty for liking streamlining debt and closing cards but that's me. The list is great as it tells you what order you need to do but with your new budget there's more flexibility. I would be more motivated if I'm losing creditors every month or other month. And more and more money to the remaining debts.

What I'm trying to say is you do what keeps you on plan. No one will think you're doing it wrong. This is your challenge and you are the one paying it down. We want to see you succeed more than we want you to follow some formula or plan. Xxxx

BabyStepper

I think I read your mind, maybe I'm learning something! I agree that paying the overdraft first is sensible but after that, stick to the order based on 0% deals running out. There is no point paying off debts with such long 0% terms when others are approaching much faster. I was looking forward to simplifying things by taking minimum payments off the budget when things are paid off but I do just need to wait.

I'm paying a fixed amount to Lloyds of £15, and Hitachi is £42.20. That 20p really winds me up when I'm adding up totals and checking things. Everything else is an even amount.

We are planning £1400 every month to debts, that means the last month of this plan will only need around £400. We thought we'd aim high as things are good just now, but gives us some leeway if things go wrong later on. Anything can happen in 12 months. I've trying to build in as many cushions/buffers/whatever you want to call it as I possibly can to protect this plan and give some flexibility.

With our wages at the end of March I'll pay £1000 to the overdraft, cover all minimums elsewhere, and the small extra can go to the Santander card. It's hard to pay off overdrafts, you can't just throw everything at it because they only reduce it in lump sums. But by the next month it will be gone. Hard to imagine seeing a positive balance in that account. Things to look forward to.

Thanks enthusiasticsaver.

BabyStepper

kitten868 that's exactly right, I have worked so hard and paid off so much but still have not paid off one card in full, so I still have the same total amount of debts. But this is where impatience comes in, I need to remember money management is for life, not just for debt repayment time, so I want to do the sensible thing. If I paid off the small ones first, then something happened to our income, I'd be looking for balance transfers needlessly when I already had debt on long 0% deals.

I just need to hold tight and see how things unfold.

Kitten868

I think you've misunderstood me. I meant if paying off the small ones first and closing them is what you need to keep you going then do it. I'd rather you paid them in the wrong order but kept going than found it too demotivating fighting down the 3k with all the others to contend with on top. It's your battle. I know I would pay them in the wrong order in your shoes xxx

Moneywhizz

I definitely think paying off the overdraft first is the best idea, given that it can be recalled at any time and also that seeing your bank account in the black every month will be great. It makes sense to continue paying the other debts in the order you have listed them, but you could compromise and pay off one of them next. If the Hitachi loan does annoy you why not pay it off and that would be two debts gone. With the amount that you are planning to pay off each month the debts will soon begin to disappear. Since you are planning on being debt free within a year, and have beans disciplined in sticking to your plans, it really doesn't make a great deal of difference the order you pay them. Not trying to wish your life away but debt freedom will be here before you know it and you can move on with your other plans. How different your diary is from a few months ago when you were so anxious about everything. You have really turned a corner and sound so happy and positive.

DD265

I agree paying off the overdraft first feels like a good move. I always thought it was the easiest to spend and the most difficult to get rid of!

BabyStepper

Thanks kitten868, I did misunderstand you, motivation is a big factor too so the Hitachi loan might be paid off sooner. I think I need a combination of sensible decisions with a bit of quick progress for motivation thrown in to keep me going. I'm not sure if such a balance is even possible but here goes.

Given recent overpayments to the Barclaycard I have reduced the monthly payment to £35, same as Halifax and Santander. Lloyds at £15, MBNA at £60 and Hitachi at £42.20. Total minimums per month are £222.20. This will leave £1,177.80 every month to allocate wherever. I really need to think this through properly. We have an interim month in March when only minimums will be paid due to cashflowing house repairs. Anything extra that month will go to the house maintenance pot. Then we can get started. Here are the things I need to think about, please bear with me.

Overdraft needs to go first.

Santander finishes its 0% deal first so needs to be a priority.

Halifax and Lloyds are on such long deals that they really need to wait until last.

Lloyds is small and I will be tempted to pay it off sooner for a quick win.

MBNA is huge and scary. Ideally I would want to wait until I have the most available I can every month to pay it down but this means waiting until last so that won't work.

I am desperate to pay off the Hitachi loan.

BC 3 can get paid off in 1 month.

BC3 and MBNA finish their deals in the same month early next year. Hitchi due to finish at around that time too.

Keeping all that in mind, here is my revised plan...

April and May £1000 to overdraft and £177.80 to Santander. Overdraft gone.

Along with minimum payments during this time, Santander will then be at around £2,660. It will take 3 months to pay it off anyway so is there any harm in...

June Pay off Hitachi (around 400 by then) remainder to Santander. Hitachi gone.

July and August Santander. Remainder to MBNA. Santander gone.

Now MBNA and BC3 finish their deals in the same month so...

September BC3. BC3 gone.

I will then tackle MBNA with full force. It should be considerably smaller by then and with BC3, Santander and Hitachi paid off I'll have £1,290 to throw at it along with the £60 minimum payment. This leaves it a bit longer than is ideal, but I will have until February to pay it off and if the worst came to the worst, I would just need to push my DFD back a bit. With long deals on Halifax and Llloyds that would be ok. No balance transfers or anything. The thought of simplifying things, having fewer payments on my budget, not having to look out for DDs going out, feeling the success of paying things off in full, is all very appealing.

My brain now feels like it's about to go on fire so I'll stop there. Please feel free to point out any glaring mistakes/omissions/reasons why this plan might not work. The only thing I can see is that I will want to pay off Lloyds but it will really need to wait.

Kitten868

Love your plan. Does having it written out like that make you more certain of doing it? Could you have it written down somewhere so you can tick it off?

I totally agree that reducing the number of people to pay will motivate you. And getting to call every month and say close this card will help too.

And if it helps when you get round to mbna it'll be under £5k! So not quite the gigantic hideous monster it is now.

Keep it up! You can so do this! Xxxx