Payment holiday and Paying off other debts

bamgbost

Something I been thinking of, but will it work.

I was thinking to take payment holidays for a couple loans, and using that money to then pay off other higher interest debts. e.g. Overdraft and Credit Cards. Does this help? with reducing the debt? Or is this a big mistake?

On paper it sounds ok to me. Take a break on 6% loan to overpay 30% on other debt right.?

Let me know if this decision makes sense.

BabyStepper

Juggling payments this way to save a few quid doesn't seem like much of a strategy to repay your debt. When you take a payment holiday on your loan, they will continue to charge interest during that time so you will end up paying more and for a longer period. If you post an soa we can try to help you figure out a better way. 

fatbelly

As above. If things are that desperate, you need an overall strategy.

bamgbost

fatbelly said:

As above. If things are that desperate, you need an overall strategy.

Yes i do hear what you are saying guys.

And I do have an SOA and strategy ( i think). Its all in my signature link.

I guess, this particular thread, I created just to ask the Q, if it makes any sense at all. Afterall they do say everylittle helps, no?

But if you can take a look at my SOA and story in the signature thread. And have any comments, I would appreciate it.

BabyStepper

This question is not as simple as it looks. If you compare 30% and 6% then obviously 6 is smaller so 30 should be the priority. However, it's a loan and a credit card, 2 very different things.

Your loan will be over several years, may have been front loaded with interest, or have a ballon payment at the end, or have an early repayment penalty fee, or something else entirely. All of this makes working out the exact cost of the loan, and the cost of deferring a payment or 2 or 3, impossible for us to calculate. 

The credit card on the other hand, may be charging more interest but you could pay it off tomorrow with no penalty. But only when the cash is available to do so. If this is your target card in your debt plan and you're getting some kind of bonus soon, then it could cost you more to defer payments to the loan to overpay the card. 

Is this making sense?

If you want to explore this, then dig out the paper work for all of your loans and find out what it is you bought and how much it has cost you already and will cost you going forward. (This will be really important to do anyway as you have 4 loans and they will all need dealt with after the credit cards are sorted. Are 2 of them car loans?) Post it up here and we can help you work out what/if you could be changing in your debt plan to save some money. It might be helpful to defer, it might not, it might be a lot of hassle for a tiny saving. 

And of course, all of it depends on predicting the future and how long it will take to pay your card off without deferring your loan, telling us how much interest you will pay over time.  

BabyStepper

Also, these deferrals being offered are essentially for people in debt crisis who can't make their payments. They will show on your credit history and may impact any 0% cc offers you can or can't get. I don't believe any of us understand in full how banks are treating this, it doesn't seem to be consistent. Some people are struggling with new mortgages because they took payment holidays early last year. While you're making loan payments in full and on time, your credit history looks better. I'd just keep doing that, if I were you. But do go and find out what kind of loans you have so you can be ready. 

Jamesyb123

bamgbost said:

Something I been thinking of, but will it work.

I was thinking to take payment holidays for a couple loans, and using that money to then pay off other higher interest debts. e.g. Overdraft and Credit Cards. Does this help? with reducing the debt? Or is this a big mistake?

On paper it sounds ok to me. Take a break on 6% loan to overpay 30% on other debt right.?

Let me know if this decision makes sense.

Im not sure but with payment holidays at the moment they may want evidence to show why you can’t pay so this may not be possible anyway if you are not in financial hardship. But as others have said it’s better to have an overall strategy to get everything resolved.

bamgbost

ok. Thanks guys... for sparing the time and commenting. You have made some valid points that are food for thought. Will defo evaluate further

BlueJ94

With the payment holidays I think you still get charged interest. I know when I took a payment holiday with Capital one I was still getting interest added each month, not sure if its the same with loans