To clear the final debt (or not).

MrDebtWarrior

Hi All,
In the last 18 months myself and the better half have been able to clear around £27.5k of debt from our lives. Debts were a mixture of car finance, credit cards and bank of mum and dad.

In the last couple of months, we finally reached the point where we had more than we owed, 'in the black' for the first time in probably 13 years for me. 

My dilemma is this

Our final debt is £2,700, which is interest free for another 18 months. 

We have about £4k between current and savings account. 

The DFW in me really wants to just pay the balance and be done with it but a part of me wants to continue building our emergency fund and also begin to fill our savings pots for stuff like Insurances. I'm paying a set £200 a month on the card which will clear it well before the interest free ends. 

I think if I was reading this and someone else was posting, I'd be saying 'pay the card and be free'.

madaboutspots

Wow you've come so far. Well done! That is an amazing amount of debt to clear. You should both be so proud of yourselves.

Free yourselves - 2020 has been awful... Go onto 2021 with that amazing high that you're debt free and still have an emergency fund. Use the next years to move forward and keep building the savings, remember what you've learnt and never ever do it again. 😁

I think the freedom of being debt free is such a superb position to be in, it totally trumps the stress and constant worry/fear of being in any debt. I've been in both places - in desperate debt and now debt free with savings. I would never go back to owing money (mortgage aside).... Come join the debt free people on the sunny side. You won't regret it.

Amazing job, congratulations.

femalemonarchfemalecanine

Well done.
 I'd do the opposite, carry on paying £200 a month build up savings with the knowledge that you could pay if off. But do whatever makes you feel most comfortable/happiest.

fatbelly

4k is  the sort of sum you can get some sort of interest on. So I'd look after it and just make the contractual payments on the £2700 debt.

ryanm8655

I was in the same position and chose to clear the debt but I had never been debt free in my adult life (ever since my first student overdraft), so it was more of a psychological boost to me.

Financially, the sensible thing to do is to keep saving and try to get some interest on the money, then use some of the funds saved to clear it come expiry.

How long would it take to save the £4K again? In my case it isn’t that long as I have minimal outgoings right now.

I should also add that clearing all of my debt felt a little anticlimactic, particularly as I’d wiped out any savings and needed to save to move and get my independence again (I moved back to family).

MFWannabe

MrDebtWarrior said:

Hi All,
In the last 18 months myself and the better half have been able to clear around £27.5k of debt from our lives. Debts were a mixture of car finance, credit cards and bank of mum and dad.

In the last couple of months, we finally reached the point where we had more than we owed, 'in the black' for the first time in probably 13 years for me. 

My dilemma is this

Our final debt is £2,700, which is interest free for another 18 months. 

We have about £4k between current and savings account. 

The DFW in me really wants to just pay the balance and be done with it but a part of me wants to continue building our emergency fund and also begin to fill our savings pots for stuff like Insurances. I'm paying a set £200 a month on the card which will clear it well before the interest free ends. 

I think if I was reading this and someone else was posting, I'd be saying 'pay the card and be free'.

How long will it take you to save the £2,700 again? If it’s a matter of months I’d be inclined to pay it off and be done with it. if not I’d leave it a bit longer. 
What would the figures look like in 6 months? Cc will be £1,500 and savings of X 
its good to have some savings buffer in case of emergency; stops spending on cards 

greensalad

I'd divide the amount left by the number of months so I can pay it off when the 0% interest period ends (maybe one month early to be safe) and put the rest in savings. It's what I'm doign currently. My last CC has £1,200 or so on it and it'll be paid off in January, the period ends in February.

Karonher

I would carry on as you are and pay the debt down as it is 0%. If you have extra money left at the end of the month then you could pay the card down and still have your savings. 

vixx_123

Karonher said:

I would carry on as you are and pay the debt down as it is 0%. If you have extra money left at the end of the month then you could pay the card down and still have your savings. 

I agree with this approach

zippygeorgeandben

Well done to all concerned!  Brilliant to become almost DFW.  AND you'll get a lovely badge under your avatar when you hit that milestone!

enthusiasticsaver

Carry on paying the £200 as that will clear the card before the interest deal expires and build up savings instead.  You are debt neutral now which is just as good as debt free. Well done.