Which to tackle first 28 September 2019 at 5:37PM in Debt-free wannabe 13 replies 1.2K views

PayItOff

Hi all,

So i've got around 20k of debt that I'm trying to tackle. Mostly private postgrad loans but a van loan and some to my boyfriend (used to pay off student overdraft before it was fee paying). I'm making minimums at the moment but my income should be rising in the next 3/4 months so I'm looking to overpay. My question is which one do I start with?

Boyfriend loan - £1450 (0%)
Van loan - £4500 (4.5%) 122pm
1st Postgrad loan - £8500 (9.58%) 210pm
2nd Postgrad loan - £5050 (6%) 62pm

:eek: Obviously they all have pretty high balances so no easy wins! What would you start trickling extra to? Would be good to get that DFD closer then 10/2024.

Willing2Learn

Firstly, keep to the terms of your Boyfriends loan.

Other than that - I always recommend paying the debt with the highest APR first.
(1st Postgrad loan - £8500 (9.58%)

enthusiasticsaver

I would overpay the most expensive so the post grad loan charging 9.58%.

PayItOff

Ok so larger postgrad loan it is!

I would also like to buy a house in the next 5 years so will need to save up my half of a decent deposit. Looking to open a H2B ISA as i know these are finishing soon. Would it make sense to put extra into that? Obviously that is 25% bonus which would be more than the loan interest rates? So any more than the £200 limit goes off debt?

enthusiasticsaver

Given that your loans are not a horrendous rate of interest albeit probably less than your HTB is giving (excluding the bonus) then I would do both alongside as well as saving for emergencies so you are not tempted to turn to credit. You will be in a much better position to get a mortgage if that debt is gone.

enthusiasticsaver

Approx £180 overpayment on that £8500 loan will see it gone in 2 years (presumably it is around 4 years left on it?) and even a £60 overpayment will get it paid off in 3 years.

The second post grad loan looks like it is a long term loan (more than 5 years?) Tackle that one next by diverting the post grad 1 loan payments towards it and the Van loan last of all.

PayItOff

Oh wow! I never thought overpaying such a little amount would knock it down that early. You are correct that the PostGrad 2 loan is a longer term loan 5 years from graduation - one of those pay nominal amount while studying and then a bit more after graduation (ashamed to say that it's opening balance was 5000 so in a year of increased payments i've not even covered the interest:o)

Order to tackle then is:
H2B
Boyfriend
1st Postgrad
2nd Postgrad
Van loan

PayItOff

Grrrrr so just got off the phone to CoOp and i cannot drip feed overpayments to the 1st postgrad loan. I would have to phone them up and do a 'partial' repayment? I guess i don't save any interest then?

enthusiasticsaver

PayItOff wrote: »

Grrrrr so just got off the phone to CoOp and i cannot drip feed overpayments to the 1st postgrad loan. I would have to phone them up and do a 'partial' repayment? I guess i don't save any interest then?

Is interest charged on a daily basis and are you limited on how many partial repayments you can do? What is to stop you doing a partial repayment each month? If interest is calculated daily and presumably charged monthly you will still save on interest and get it repaid earlier than the original term but a bit more hassle. Alternatively save up say £500 and then do a partial repayment depending on how often you can do it. Just make sure you want to decrease the term not the monthly repayment.

enthusiasticsaver

How much spare money will you have when your increased salary kicks in? As you say £200 a month into your HTB ISA maximises the bonus. The first postgrad loan is your biggest and most expensive debt but at least you are paying a reasonable amount towards it. You could increase the payments to postgrad loan 2 as that is going down very little each month. That could be easier than doing the partial repayments on postgrad loan 1.

Unicorn_cottage

Do you know that the H2B Isa is not the only player in the game? Have you heard of the LISA? It seems like so many people don't know it exists AND that you can only buy new builds with the H2B ISA. This is not the case.

Read about both options here: https://www.moneysavingexpert.com/isas/

Re the Coop - I had a loan with HSBC and rang them up every time I made an overpayment aka partial repayment. Just check your T&C's. I am more than confident that it will save you interest in the long term and get it off a mortgage lender's radar in the future.

If you are thinking of buying your first house have you read Martin's guide? I followed every single bit of advice he suggested and got myself into a really good position.

https://www.moneysavingexpert.com/mortgages/mortgage-guide/