Loan repayments - snowballing advice

SusieT

At 49% interest I would pay the GB loan as fast as I possibly could, then put the £239 to loan 2. That would mean all loans would be paid by the time you want to move, and you would get a better mortgage deal because of it. Far better to go into house hunting clear of loans, and probably with having replenished part of the savings than with that big interest rate sitting there staring at you.

EssexHebridean

The interest rates tell the story. Time to look at the bigger picture. if you clear all the loans right now, using that lump from the savings, you have time to then save at least a further 2k just using the amount that would have gone to loan payments and without even factoring in the amount you'll be saving by clearing them early. You will also have the advantage of starting to improve your credit history, meaning the likelihood of better mortgage deals being available to you. 

I'd suggest - clear the loans - you still have over over 40k in the pot.
Put ALL the money you would have been paying out on loan payments into a savings account each month going forward, ideally one which gives you a bonus if used as a house deposit.
Delay your planned house-hunting by a few months - maybe to spring/early summer next year.
Chances are it will be Autumn before you need the deposit money - giving you time to add perhaps another 6k, perhaps even more to your revised total after the loans have been cleared. 

Going forwards, once you have your mortgage, start overpaying IMMEDIATELY. Even a small amount has a huge impact down the line.
Each time you remortgage, look to know another few years off the remaining term and continue the OP'ing. 

The benefits of paying those loans early, for your future self, are just overwhelming. 

RAS

peteuk said:

Interest rates

Loan One 9.3% (will check tomorrow) 
Loan Two  49.9% 
Loan Three 49.1%

Savings is £46K which is the deposit for a house, this was not saved but produced as a one off payment. We are looking at buying Feb/Mar next year, so looking at paying as much of the loans off without denting the savings.   Just by paying all loans off between now and Mar we would save £3K which would be less than half spent. 

 Yikes, get rid of loan 2 and 3 immediately. Nor only are they dragging you down with huge monthly payments but any lender seeing this will wonder why you were only able to get such poor deals.

peteuk

UPDATE - 

Thanks for all the replies, having ran through more scenarios that the average soap opera storyline, at lunch the wife suggested we pay them all off, which was something she would be against as it dents the mortgage deposit.

So that's what I am doing. One paid today (Loan One), attempt to pay second (Loan Two) but bank have blocked my card and have now decided to replace this.  Loan three awaiting new settlement figure.  Should have card details tomorrow so I can pay them off, new card arrives in three to five days. 

So its just credit cards we have now, all of which are under limit and getting a set payment paid monthly.

EssexHebridean

Well done Pete - good decisions all round there. I assume then in the first instance once the loans are gone you will be turning your attention (and surplus income) to those CC's as those also will impact how good a mortgage deal you can achieve. 

One final relevant question - have you now sorted out all the issues that have caused you to have had the debt issues in the past? Your situation is in one very important way "non-ideal" - and this is that as a rule we would advise against using a lump sum of money like an inheritance or an insurance payout to clear debt as it means that you don't put in the full "grind" involved in clearing off, and this often leads to folk running up debts all over again. I appreciate that you have been through the DMP process previously, but it also appears that you have taken out new debt since finishing this? Before going ahead with owning a property it's absolutely vital that you are confident that you now have your situation under control and are in a position to be able to budget and save before spending. 

SusieT

peteuk said:

UPDATE - 

Thanks for all the replies, having ran through more scenarios that the average soap opera storyline, at lunch the wife suggested we pay them all off, which was something she would be against as it dents the mortgage deposit.

So that's what I am doing. One paid today (Loan One), attempt to pay second (Loan Two) but bank have blocked my card and have now decided to replace this.  Loan three awaiting new settlement figure.  Should have card details tomorrow so I can pay them off, new card arrives in three to five days. 

So its just credit cards we have now, all of which are under limit and getting a set payment paid monthly.

That is very good news, you will be able to repay a lot of the deposit that you will be using before you look to move, and you may even be able to put extra to your cards as well so that they are well under the limit by then. 

Sea_Shell

peteuk said:

UPDATE - 

Thanks for all the replies, having ran through more scenarios that the average soap opera storyline, at lunch the wife suggested we pay them all off, which was something she would be against as it dents the mortgage deposit.

So that's what I am doing. One paid today (Loan One), attempt to pay second (Loan Two) but bank have blocked my card and have now decided to replace this.  Loan three awaiting new settlement figure.  Should have card details tomorrow so I can pay them off, new card arrives in three to five days. 

So its just credit cards we have now, all of which are under limit and getting a set payment paid monthly.

What are the balances and rates on the CCs?

Surely the same argument for paying them off too applies.

peteuk

EssexHebridean said:

Well done Pete - good decisions all round there. I assume then in the first instance once the loans are gone you will be turning your attention (and surplus income) to those CC's as those also will impact how good a mortgage deal you can achieve. 

One final relevant question - have you now sorted out all the issues that have caused you to have had the debt issues in the past? Your situation is in one very important way "non-ideal" - and this is that as a rule we would advise against using a lump sum of money like an inheritance or an insurance payout to clear debt as it means that you don't put in the full "grind" involved in clearing off, and this often leads to folk running up debts all over again. I appreciate that you have been through the DMP process previously, but it also appears that you have taken out new debt since finishing this? Before going ahead with owning a property it's absolutely vital that you are confident that you now have your situation under control and are in a position to be able to budget and save before spending. 

We have put off owning a house as we have not had the stability of work in a set location.  We have spent some time outside the UK so when we returned we had no savings to buy cars etc. hence the Amigo and GB loans.  Equally smaller things like not being able to get a contract phone for three months.  So yes the last loans will be paid tomorrow, the next loan may be for a replacement car in a few years time but we hope to build up our credit profile so that it wont be high interest, high risk companies.   My employment has changed and so my income has increased and my wife's job changed during lockdown to mean her income increased.   So yes we are in a better situation hence its now time to buy. 

As stupid as it might also sound having gone through the DMP and taking control of it ourselves towards the end of it, has made us both more aware of each others spending habits and we now spend time discussing accounts and bills.  I totally understand what your saying, as its crossed our minds on more than one occasion. 

peteuk

Sea_Shell said:

What are the balances and rates on the CCs?

Surely the same argument for paying them off too applies.

Yes your right the same argument applies to these however three credit cards and a next account for me totals £1270.  Will the wife's single credit card being less than £1000.   As mentioned these are being over paid (marginally) with a set amount, with the addition that apart from a Netflix subscription are not being used.  Chipping away slowly but now with room should the washing machine pack up we can use one of them to replace it and then pay it off when the bill comes in, should we need to. 

But your right high interest loans, also means higher interest credit cards.   Vanquish is 39.9% APR, Aqua is 0% and then 118118 is 34% APR.   That will be my next goal to zero these and get a new, low interest card. 

RAS

If your CCs are at 39%, please keep loan one and pay the same amount off the CCs.

But check the next account first as that could be worse.

This is how you make your bucks benefit you not the credit providers.