Miracle - how to use best

Skintmum86

I have just got off the phone to my Dad who I had asked the other day to loan me £13000 to clear all of my debt. When he said he couldn't I decided it was time for a DMP.

I was feeling so scared about defaulting on payments etc that I just spoke to my Dad again and....

He is going to lend me £6000 :eek::j:eek::j:eek::j:eek::j:eek::j

Safe to say I burst into tears.

So I now have £6k to pay off my debt reducing the minimum payments and meaning I can overpay. Then in 12 months I will start paying my Dad back. I have been warned that the bank of Mum and Dad is well and truly closed and never to ask again.

So my debts are as follows, what would you put the money towards and would you clear whole debts or bring amounts down? I'm going to play about with the whatsthecost snowballing calculator too and see what pays it all off the quickest.

Next: £2686 interest rate 23% minimum payment currently £146 PM

MBNA £1741 interest rate about 19% minimum payment currently £48 PM

Santander credit card 1 £4161 interest rate 18% minimum payment currently £110 PM

Santander credit card 2 £2661 interest rate 18% minimum payment currently £62 PM

Santander overdraft £800 interest rate ?? Ipay about £27 a month in o/d fees

Very £1700 interest rate of 39% £1400 of it is on BNPL 0% but all within quick succession from May. Current minimum payment is about £20 a month but will be £120 from Jan to pay some BNPL before the interest hits.

Thank you all so so much for your help so far when I was going to go on a DMP. :money:

SusieT

Personally I would get rid of the overdraft and do not use it again, normally with the charges and interest it is a very expensive way to borrow money. You will save on charges and interest so should have a bit more left in the bank to avoid using it in future.
Next is high interest so clear that and you have 2 debts gone completely.
Then I would pay the part of VERY that is interest bearing, but make sure you call them to say exactly what it is to clear. With the potential interest rate that is approaching personally I would throw the saved payment to Next at VERY to know it will be cleared by the time interest hits.
The remainder would go from Santander 2 for a morale boost in knowing that you have 2 debts less, Santander in the hundreds, Very will be paid off before May and the extra that you are not paying can clear the remainder of Santander fairly quickly then just the Santander 1 to go.

I would also cut up the high interest cards and close the accounts so that you never use them again. Perhaps keep 1 of the Santander to use in a complete emergency or to have for the S.75 protection, but pay in full every month.

Willing2Learn

I would also pay off the £800 overdraft first. Then I recommend you request the OD facility is withdrawn by your bank.

I would then pay off your remaining accounts, starting with the one with the highest APR.
So, I would clear Very £1,700@ 39.9% APR followed by the Next account £2,686 @ 23% APR.
(I know that Very is on BNPL, but in my book the account should still be cleared as a priority.)

Then I'd use the remaining £814 to make a start on your Emergency Fund (EF). Or alternatively pay off £814 from the MBNA card @ 19% APR. I cannot stress how important it is to have an EF squirreled away, to pay for the unknown costs that will crop up from time to time.

In a few months time, I might be tempted to apply for a Balance Transfer card on a promotional 0% APR...


Edit: Just wanted to add that I would still recommend you doing a new SOA and keeping a spending diary. You need to make sure that you are sticking to your new SOA including putting money aside each month toward your Emergency Fund.

Karonher

I would pay off Next, MBNA, the overdraft and the £300 you pay interest on for Very. That should leave you just under £500 from the loan and an extra £241 a month to pay to the others.

I would then pay the £500 and the extra off Santander 2. Then from January I would put the extra towards Very. This will make the £120 + £241 enough to get it cleared by the end of April.

Then clear Santander 2 before making all the payments off Santander 1.

Now everything needs to go to Santander 1 and by now you should have around £500 a month meaning it can be gone by about September.

The figures I have used are not including interest that will be added so will be a little out but things are certainly looking better.

DrEskimo

Willing2Learn wrote: »

I would also pay off the £800 overdraft first. Then I recommend you request the OD facility is withdrawn by your bank.

I would then pay off your remaining accounts, starting with the one with the highest APR.
So, I would clear Very £1,700@ 39.9% APR followed by the Next account £2,686 @ 23% APR.
(I know that Very is on BNPL, but in my book the account should still be cleared as a priority.)

Then I'd use the remaining £814 to make a start on your Emergency Fund (EF). Or alternatively pay off £814 from the MBNA card @ 19% APR. I cannot stress how important it is to have an EF squirreled away, to pay for the unknown costs that will crop up from time to time.

In a few months time, I might be tempted to apply for a Balance Transfer card on a promotional 0% APR...


Edit: Just wanted to add that I would still recommend you doing a new SOA and keeping a spending diary. You need to make sure that you are sticking to your new SOA including putting money aside each month toward your Emergency Fund.

Couldn't agree more.

I was just about to comment how you should, if you haven't already, put ~£1,000 of it in an easy access savings account (don't worry about the interest rate) to form your starter Emergency Fund.

Best of luck!

sourcrates

Hi,

Hang on just one minute, before you start spending your dads hard earned cash.
Its not a miricle, lets get a bit of background information from you, you may qualify for a debt solution that means dad can keep his money.

I don`t really agree with a parent bail out such as this, without there been strict conditions attached, unfortunatly dad may not be in a position to impose such restrictions.

You must start living within your means so you don`t have to rely on credit anymore, address the issues, whatever they may have been, that got you into this debt in the first place, and, make sure it never happens again !!

Why not post up an SOA and we`ll see if a more sencible solution is available for you :

https://www.lemonfool.co.uk/financecalculators/soa.php


It also appears non of your debts have defaulted, so you will still pay massive amounts of interest, and that 6k will just be swallowed up as if it was nothing.

Many people get bailed out, some more than once, yet they don`t learn from their mistakes previously, and the bad financial planning continues.
This is a bad decision at this juncture, you appear to be rushing into spending more money, when infact a DMP or other solution may have been a better choice.

D_M_E

If it were me I would

1. Clear overdraft and ask that it be reduced to £100 max

2. Clear Very completely and ask that the account be closed - BNPL deals seem to be designed to trap people into paying eyewatering rates when they don't realise the interest commencement day is fast approaching.

3. Clear Next

4. Pay what's left to MBNA.

Going forward, set up a savings account and transfer £50 a month into it to build up an emergency fund, keep payments to both Santanders the same as now but increase both by £10 and put what's left from saved payments into clearing MBNA, then when that's gone increase payments to Santander 2 until that's gone then move on to the final one.

Skintmum86

Hi Sourcrates the reason I was so keen to avoid a DMP is because I am hoping o bu a house with my partner in the next 1-2 years and we would need both our names on the mortgage for affordability.

All of my credit card debt is from my ex husband so no chance that will build up again and the store cards I will close as they are my own stupid doing.

fatbelly

I posted on your other thread this morning and am surprised at the abrupt change of plan.

It will not come as a surprise to regular dfw readers that I agree with Sourcrates.

6k is not enough here to even pay off the high interest debt and so, we'll meaning though it is, I am not convinced by the strategy.

A dmp at least should kill the interest and if you do it through stepchange then they should be constantly monitoring your account to see if another strategy would be better suited.

If you post an soa we can make sensible suggestions.

monetxchange

I’d agree with the above. You’ve posted three threads in the last 24 hours and I think you’re a bit frantic, desperate to find the quickest solution. Don’t do anything yet. Take a breath and post an SOA and people on here will be able to advise you which route is best. It’s not always the easiest fix.

I remember your thread from a couple of months ago. I really wouldn’t write off a DMP just because you might buy a house in a couple of years. As I recall, your partner was young and wasn’t anywhere close to being able to contribute properly to your joint bills, so I’d imagine a house would be something that’s a way off yet. No use rushing into more debt until you’ve got straight and have a decent mutual financial plan in place for the future.

Skintmum86

My partner is contributing g much more now thankfully .

I'm aware that I've probably come across as a but frantic but I am going to work out properly later what best to pay off and have a plan put in place to be saving towards an emergency fund.

Thanks all I will post an SOA later

K