Saving a deposit and paying off credit card debt at same time

barrysmith2480

Hi 

I am after a little advice , my partner and I have historically been pretty rubbish with money but last October we decided things were getting a little better and we would try to save a deposit for a house , we have never saved a penny in our lives before.  At the same time we had just over 3k of credit card debt we planned to get paid down and were hoping would be clear by 6 months or so.  

At first things had gone well but the last few months have been a struggle with some unexpected stuff getting in the way as a result we have saved barely £100 and ended up putting a few hundred on the credit cards.  So far we have saved 2.1k which for us feels like a massive deal as i say we were so bad spending wise for over a decade , we got the credit cards down to about 1.8k including the new spend but the 0% rate on one which has 1k on ends this month and the remaining balance is split between two which have only been getting minimum payments.

Basically i dont know if its a better to keep pressing on balancing things between saving and paying the debt down or use the saving to clear the cards once and for all then restart the saving plan.  The though of spending the saving money tho has got me really down as it felt like such and achievement although its still nowhere near the amount we need , its almost like proof we can do it.  The other element to this is the house we rent is up for sale and while we have only had two people view it in 14 months we just dont feel very secure.

Whats the best course of action here.

Capri84

Pay off the debt and it’ll be a big relief knowing you have no debt

Then ALL your money can go into savings, so it’ll build up at a quicker rate. And you’ll know you owe nothing to anyone. 

I’m sure Martin Lewis advises to always pay off debt before saving...

barrysmith2480

its not all my debt just the credit cards , i still have the usual car finance , old bank loan etc but stuff that ive payed for years with no issue

MWT

barrysmith2480 said:

So far we have saved 2.1k which for us feels like a massive deal as i say we were so bad spending wise for over a decade , we got the credit cards down to about 1.8k including the new spend but the 0% rate on one which has 1k on ends this month and the remaining balance is split between two which have only been getting minimum payments.

It isn't really 'savings' unless you've paid off the old credit card debt, it is just money you've decided not to use to deal with the cards...

If the 0% rate is ending this month I don't see how it makes sense not to just use the 'savings' to pay that off before you get hit with an interest charge (if it is not already too late to avoid).

One way or another if you want to save for a deposit/legal fees/other costs and get a mortgage the old credit card debit should ideally be gone and your monthly living expenses under control so you don't let the cards build up again.

You don't have to be debt-free to get a mortgage, but when you have car finance & an existing bank loan you are pushing it a bit to also be carrying old credit card balances as well...

Vkz

I am a massive Dave Ramsey fan (as well as Martin Lewis) and in his Baby Steps he advises to pay off all debt and have a fully funded emergency fund before saving for a house deposit. You will be in a much better situation and like others have said, you’ll have freedom. 

barrysmith2480

no the plan was to have the credit cards paid off by the time we apply for the mortgage , i dont understand how they expect you to apply for a mortgage as a bloke in his 40s with two kids and not have car finance , little bit of HP and maybe a loan , i mean i get the credit cards but isnt that other stuff normal life.  I mean i pay it all never been late and have extortionate rent ive never missed it always get me upset that banks seem to want you to live this vanilla life where u never spend any money.

barrysmith2480

Vkz said:

I am a massive Dave Ramsey fan (as well as Martin Lewis) and in his Baby Steps he advises to pay off all debt and have a fully funded emergency fund before saving for a house deposit. You will be in a much better situation and like others have said, you’ll have freedom. 

i guess its the right move then ,ill pay them all off today 

[Deleted User]

barrysmith2480 said:

i dont understand how they expect you to apply for a mortgage as a bloke in his 40s with two kids and not have car finance , little bit of HP and maybe a loan , i mean i get the credit cards but isnt that other stuff normal life.  

It's really not.  That's a LOT of borrowing.

Banks expect you to spend money - they just prefer it if t least some of it is actually yours. Continued borrowing makes you a high risk.

You need to sit down and look at the rates on your various debts and tackle the highest rate ones first.  These are the ones which are making you the poorest and holding you back the most.

barrysmith2480

Deleted_User said:

barrysmith2480 said:

i dont understand how they expect you to apply for a mortgage as a bloke in his 40s with two kids and not have car finance , little bit of HP and maybe a loan , i mean i get the credit cards but isnt that other stuff normal life.  

It's really not.  That's a LOT of borrowing.

Banks expect you to spend money - they just prefer it if t least some of it is actually yours. Continued borrowing makes you a high risk.

You need to sit down and look at the rates on your various debts and tackle the highest rate ones first.  These are the ones which are making you the poorest and holding you back the most.

thats a lot ?? are u telling me all these people driving round have all paid cash for their cars , every two seconds i see a BMW and range rover i doubt these ppl are not on PCP , 

So i earn 50k a year my wife 18k , we have two cars on PCP 130 and 225 a month , a laptop on HP for 48 quid a month a bank loan at 193 quid a month.  thats considered a lot of debt ??

[Deleted User]

Correct.  That's a lot of debt for things that most people pay cash for, especially on your income. 

Your 2 second BMW sightings may not be representative (or true). 

barrysmith2480

i really dont understand , ive just asked every single person in my office if they paid cash or have cars on PCP all said PCP , i tend to wonder that as some of you spend a lot of time on this site your maybe very money focused ppl and as a result this isnt an accurate representation of what the general public have. 

If thats a lot of debt and i tend to have 500-600 quid spare at the end of the month it must mean that most ppl are better off than me and saving thousands every single month.  I cant understand it i really cant , everyone i know gets a sofa on HP , has a contract mobile  and maybe a loan knocking around.