Plan to clear £34k debt mountain

jls85

As is the case for many of us, this COVID situation has prompted me to finally get my finances in order. I’ve made many attempts to do this in the past, but the limited amount I normally have left at the end of each month has meant my progress has been slow and, to be completely honest, has led me to give up many times. I know it’s the wrong mindset, but £34k worth of debt feels so huge that making small cutbacks doesn’t seem like it’s going to make even the slightest dent. 

But now that I have a bit more time on my hands, I’ve decided to use this opportunity to sort the debts out once and for all. and I’m going to use this diary to help keep me motivated and accountable 😊

So as it stands, my current debts are as follows:

Loan #1: Nationwide, £10,600, 15%, £251 p/month
Loan #2: Tesco Bank, £17,115, 9%, £350 p/ month
Loan #3: Northridge car finance, £6,400, 6.9%, £141 p/month
Total: £34,115

My aim is to focus all of my attention on loan #1 to begin with, with the aim of paying it back by 15 SEPTEMBER 2020 (I get paid on the 15th of the month). I’ll then move on to the other two loans.

I know paying back that amount of money by September is a HUGE goal, but I have a plan…

I am currently in a fairly lucky position, in that I applied for payment breaks on my mortgage and loans as I was told my job was likely to be at risk due to COVID, but they ended up finding work for me to do at the last minute. So I have been saving the money I should have been paying towards the mortgage and loans into my savings account. This, along with the extra money I am able to save each month due to the lockdown, means I have managed to build up a savings pot of £5k in 3 months. 

Given the fact that my job security could still be shaky, I am going to keep this money in my savings account for another couple of months just to be safe. But after that, the plan is to put it all towards loan #1. Also, although my payment breaks are now over, I have calculated that I’ll still be able to put £600 per month towards the loan between July and September (after which I’m likely to be due back in the physical office and commuting costs will increase again). And, given I have a bit more time on my hands due to the lack of commute, I am going to try to make up the shortfall by selling on eBay, matched betting (which I have been dabbling in for a while) and by making savings when and where I can. 

So in a nutshell, the aim is as follows:

Current savings = £5,000
Save £600 per month from July, August and September wages = £1800
Loan payments resume @ £252 per month from July until September = £765
Try to make £30 PER DAY* for 102 days = £3060
Total: £10,625

As I said, I know this is a huge goal, but my thinking is even if I don’t make the full amount, it’ll hopefully get me pretty close to paying the first loan back. I will then aim to put the £250 per month from the NW loan towards the Tesco Bank loan, as well as any extra money I can save, and start chipping away at loan #2 next.

So that’s it for now, but thanks to anyone that is reading and I’ll be back later to update on any progress.

JLS x

[Deleted User]

I paid mine back by making the monthly payment and then paying off the spare amount I had in the account, amazing how quickly it came down.

jls85

Ok so that was quick - got a £36 refund from Wickes that I've been chasing for a few months. I'll transfer it into my main savings account as soon as it clears.

Shortfall total so far: £36/£3060

enthusiasticsaver

What was the logic of taking a payment break on the loan and saving the money at presumably a much lower rate than 15%? Whilst I understand initially if you were worried about not being paid presumably Nationwide have not stopped the interest between March and June? Or have they in which case you have done the right thing? Otherwise you might have done better to do as csarina did and carry on making the payments and use any money saved from commuting and not shopping etc to pay it down further. 

Is that £10,600 a current balance? It is actually costing you over £132 in interest each month (unless they suspended interest) so I would use as much of that £5k you have saved to pay it down now even if you are not sure what is happening about your job.  

enthusiasticsaver

A quick google shows Nationwide were still charging interest during payment holidays so the balances of all your debts will have gone up. 

jls85

I work in the television industry, so the logic was that it was looking very likely that I was going to lose my job and not be able to get another one for quite some time. Prior to this, I had £100 left at the end of each month after all of my outgoings, so it seemed wise to take the payment breaks to build up some sort of an emergency fund in case the worst happened. I'm aware the loan is still costing me interest, but it is also putting my mind at rest which is just as important, if not more so, in my mind. Plus my plan is to pay it back in September (or as close to that as possible), which is 3.5 years earlier than scheduled, so that should save me interest too shouldn't it?

jls85

enthusiasticsaver said:

A quick google shows Nationwide were still charging interest during payment holidays so the balances of all your debts will have gone up. 

The balances I have quoted are the increased balances as per my online accounts/letters re payments resuming so I have factored this in.

Kitten868

I have to agree with enthusiastic saver. You have made your loan more expensive. I totally understand why you have done as you have and don't disagree with people having loan breaks  but I think it's not compatible with your plan now. Every penny you over pay now you are no longer being charged interest on. 
When will you find out more about your job situation? 
You can definitely do this! Especially if you lose 1/3 of your debt so quickly x

enthusiasticsaver

jls85 said:

 Plus my plan is to pay it back in September (or as close to that as possible), which is 3.5 years earlier than scheduled, so that should save me interest too shouldn't it?

Not really as loans charge daily interest.  All the time you are leaving the balance with no repayments it is charging you interest so at the end of June the balance will be £10600 plus the June interest of approx. £132. 

jls85

Kitten868 said:

I have to agree with enthusiastic saver. You have made your loan more expensive. I totally understand why you have done as you have and don't disagree with people having loan breaks  but I think it's not compatible with your plan now. Every penny you over pay now you are no longer being charged interest on. 
When will you find out more about your job situation? 
You can definitely do this! Especially if you lose 1/3 of your debt so quickly x

I don't know when the decision will be made. We have been tasked with finding a way to get the shoot back up and running safely, and at the moment that isn't possible. If we still can't find a way to make it work in the next few weeks, the channel could decide to stop funding us as they are currently getting no return on investment and pull us from the air. This is the same situation across the whole industry too, so the chances of getting another job that would pay as much as i am currently on (£40k p/a) is very slim. 

I do appreciate the advice, and I will look at paying some of the money towards the loan now to help offset the interest, but I know myself and I could barely sleep at night before for worry that I might lose my job so I couldn't pay it all towards the loan right away or I'd go right back to that again. 

Andyjflet

I would be looking at the Dave Ramsey method here and ensuring you have £1000 saved into and emergency fund for just that, proper emergencies, by not having this you are risking borrowing to sort out anything that might crop up, car nreaks, boiler blows up etc.