Which to prioritise?

Alwaysskint2016

Sorry if this has been asked before. I know when snowballing to clear debt the idea is to pay off every spare penny to the highest interest debt first then move onto the next and so forth.

My credit cards are on 0% APR until 2020/2021 and I have 2 loans with APR 15.9% and 9.2%. I would have though to pay everything to the 15.9% debt first however my credit cards will not be paid off before the rate deal ends. So is it best to clear the credit card debt first to avoid the APR going up to say 19.9% normal APR thus paying the interest on the loans? or pay off the loans first as they are the highest APR at the moment then worry about the credit card debt nearer the time, maybe switch to another 0% at that time?

I'll list the debts so you see:
Loan 1 - £145.17 per month - Ends 31/07/21 (15.9%)
Loan 2 - £223.63 per month - Ends 28/07/20 (9.2%)

CC1 - Balance £6497.84 - £65.00 per month - 0% Ends Feb 2020
CC2 - Balance £1503.39 - £40.00 per month - 0% Ends Sept 2020
CC3 - Balance £2805.03 - £40.00 per month - 0% Ends March 2020
CC4 - Balance £1698.00 - £50.00 per month - 0% Ends Jan 2021
CC5 - Balance £4878.00 - £50.00 per month - 0% Ends Jan 2020

I'm more concerned about CC1 and CC5 as their balances are much higher than the others and will never be paid off before the rate ends.

What should I do? Thanks.

[Deleted User]

Loan 1 is the priority. You'll need to look at the go to rates of the cards to see whether there are any that you should focus on.

The secret is in the rates, not the amounts.

DD265

I would definitely focus on loan 1, however, what are the limits on CC2 and CC4? If you could clear those balances would you be able to do balance transfers from some of the other cards as those 0% deals end?

Willing2Learn

Another vote for loan #1. It has the highest interest rate. If possible, try to overpay loan #1 so that the debt is cleared early.

How close to the credit limits are the cards? If they have some breathing space then you are likely to be offered a new balance transfer promotion at some point.

As zx81 said, you need to find out what their non-promotion interest rates are for the credit cards, in order to determine their priority.

Fosterdog

How much are each of the loans for and how much extra do you have to throw at the debts?

pennystretcher

I would pay minimum on CC4 and use the difference to pay off the loans first - not sure if there are any restrictions on your loan OPs. (Loan 1 first, then #2)

SOA would be useful..

datlex

If the loans are on fixed terms then you may not be able to over pay them. You would need to speak to the loan companies.

The loans won't suddenly jump up to a higher rate. So do not pay them off first.

Pay off your credit cards, I would look at CC3 as the priority- it has the shortest remaining 0% time left.

Alwaysskint2016

Thanks everyone who's taken the time to reply to my post.

Both loans have a balance of just over £5k each and I have checked and I will be OK to repay/make additional payments. Plus any repayments will be used to reduce the last payment/end term (rather than reduce the remaining DD's, like Zopa did previously).

So I'll be making payments to Loan 1, then Loan 2 then focus on the earliest credit cards. Hopefully by then the balances will be a lot less and can shift any remaining balance around to new 0% until cleared.

Thanks again

datlex

I would seriously think twice about paying of the loans, unless you know you can get the 0% paid off or get a fresh 0% rate. You don't want to suddenly be faced with a higher debt when the interest rate applies. The loans won't increase in cost. The credit cards are likely to.

indesisiv

datlex wrote: »

I would seriously think twice about paying of the loans, unless you know you can get the 0% paid off or get a fresh 0% rate. You don't want to suddenly be faced with a higher debt when the interest rate applies. The loans won't increase in cost. The credit cards are likely to.

I'd agree with this. I'd be personally looking to clear at least 1 credit card to give yourself some flexibility for balance transfers just in case you haven't cleared the other cards before the interest rates increase.

Alwaysskint2016

datlex wrote: »

I would seriously think twice about paying of the loans, unless you know you can get the 0% paid off or get a fresh 0% rate. You don't want to suddenly be faced with a higher debt when the interest rate applies. The loans won't increase in cost. The credit cards are likely to.

This was my concern, if I did overpay the loans I will still have a large amount of debt when the 0% deals ends and the rate increases. There's no guarantee I could get another 0% balance transfer rate at that time, so you're right after looking at what the balances would be if minimum payments were made until the deals end I'm going to overpay on the earliest largest balance CC #5, then CC #1, hopefully by then there will be just a few thousand left to then balance transfer to 0% (if possible) until cleared. As you say the loans interest has already been applied so these can just run their course.

Thanks again everyone for posting.:beer: