Lifestarts has a 5 Year Plan!

Dorisd

As someone who has been working the Dave Ramsey method of snowballing, I can categorically say it works. It’s simple, pay off smallest to largest. Get the little wins first and reduce the number of debts you have so when it comes to the biggest you are disciplined enough to stick at it and have less to juggle. You may find your credit score improving by getting rid of some smaller debts enabling you to shop around for better loan terms or 0% interest credit cards.

Mathematically highest interest first makes more sense, but if we were all really good at maths and handling money we would not be here. In 2017 I had £31,000 debt it’s now at £9,000. I worked 2 jobs, 7 days a week for 2 years. I didn’t see my family or have a life. But I cash flowed a holiday, several Christmases, a car for my DD. 
I can be done using the baby steps and snowballing. 

capuchin

I think one of our calculations is way off! I'm assuming 13.8% apr, which is 1.115% monthly (0.138/12) and then multiplying that by 17500 which gives me 201.25. Amortisation will bring that down over time, but if your interest monthly is £112 then I believe you have the headline figure incorrectly listed.

In which case it may be worth paying the home improvement loan first.

I see no way that you can be paying £112/month. (Though I did just have a thought that perhaps you're calculating 13.8% total (£1344) and then dividing it by 12 to assume the interest rate. That would work only if you were paying the loan off in 1 year as the interest would taper down sharply through amortisation.

Lifestartsat40

capuchin said:

I think one of our calculations is way off! I'm assuming 13.8% apr, which is 1.115% monthly (0.138/12) and then multiplying that by 17500 which gives me 201.25. Amortisation will bring that down over time, but if your interest monthly is £112 then I believe you have the headline figure incorrectly listed.

In which case it may be worth paying the home improvement loan first.

I see no way that you can be paying £112/month. (Though I did just have a thought that perhaps you're calculating 13.8% total (£1344) and then dividing it by 12 to assume the interest rate. That would work only if you were paying the loan off in 1 year as the interest would taper down sharply through amortisation.

I did it by taking my monthly payment of £327 x 84 payments = £27,468 
Original loan was for £18,000 = £9468 is interest  - I then divided that by 84 payments which gives £112 interest each month? 

Lifestartsat40

Dorisd said:

As someone who has been working the Dave Ramsey method of snowballing, I can categorically say it works. It’s simple, pay off smallest to largest. Get the little wins first and reduce the number of debts you have so when it comes to the biggest you are disciplined enough to stick at it and have less to juggle. You may find your credit score improving by getting rid of some smaller debts enabling you to shop around for better loan terms or 0% interest credit cards.

Mathematically highest interest first makes more sense, but if we were all really good at maths and handling money we would not be here. In 2017 I had £31,000 debt it’s now at £9,000. I worked 2 jobs, 7 days a week for 2 years. I didn’t see my family or have a life. But I cash flowed a holiday, several Christmases, a car for my DD. 
I can be done using the baby steps and snowballing. 

That's great to know Doris and well done on working so hard and being so disciplined. 
Both our credit scores are very good so I don't foresee any issues getting 0% deals when the current ones end. 

capuchin

Lifestartsat40 said:

capuchin said:

I think one of our calculations is way off! I'm assuming 13.8% apr, which is 1.115% monthly (0.138/12) and then multiplying that by 17500 which gives me 201.25. Amortisation will bring that down over time, but if your interest monthly is £112 then I believe you have the headline figure incorrectly listed.

In which case it may be worth paying the home improvement loan first.

I see no way that you can be paying £112/month. (Though I did just have a thought that perhaps you're calculating 13.8% total (£1344) and then dividing it by 12 to assume the interest rate. That would work only if you were paying the loan off in 1 year as the interest would taper down sharply through amortisation.

I did it by taking my monthly payment of £327 x 84 payments = £27,468 
Original loan was for £18,000 = £9468 is interest  - I then divided that by 84 payments which gives £112 interest each month? 

Aha. £112/month on average. So right now, you are paying over £200/month interest as you owe a lot, but towards the end of the loan a lot less (say 6 months left when you owe £1500, your interest will only be £17.25 in that month as an example). Imagine a graph with the x axis as your time left on the loan, and the y as the interest you pay each month. It's a straight line down directly proportionate to the remaining debt.

So say as an example you managed to hunker down for the next 6 months and pay off £6000, the interest over the remainder of the loan would be far less.  (Assuming you've been paying the loan for a year, and have £11,500 left, you'd pay a total of £3300 more interest, and likely under 5k in total)

capuchin

Ps. About boats - They are wonderful things which truly enhance quality of life. I can fully understand why you did it! Assuming (due to price) it's an inland river boat, have you considered sharing/selling a part share of it? For example, perhaps somebody would like the boat for a weekend every month, and you could come to an arrangement based on this. Even if it only realised you £1000-1500 a year; that's mooring costs paid for.

Lifestartsat40

capuchin said:

Lifestartsat40 said:

capuchin said:

I think one of our calculations is way off! I'm assuming 13.8% apr, which is 1.115% monthly (0.138/12) and then multiplying that by 17500 which gives me 201.25. Amortisation will bring that down over time, but if your interest monthly is £112 then I believe you have the headline figure incorrectly listed.

In which case it may be worth paying the home improvement loan first.

I see no way that you can be paying £112/month. (Though I did just have a thought that perhaps you're calculating 13.8% total (£1344) and then dividing it by 12 to assume the interest rate. That would work only if you were paying the loan off in 1 year as the interest would taper down sharply through amortisation.

I did it by taking my monthly payment of £327 x 84 payments = £27,468 
Original loan was for £18,000 = £9468 is interest  - I then divided that by 84 payments which gives £112 interest each month? 

Aha. £112/month on average. So right now, you are paying over £200/month interest as you owe a lot, but towards the end of the loan a lot less (say 6 months left when you owe £1500, your interest will only be £17.25 in that month as an example). Imagine a graph with the x axis as your time left on the loan, and the y as the interest you pay each month. It's a straight line down directly proportionate to the remaining debt.

So say as an example you managed to hunker down for the next 6 months and pay off £6000, the interest over the remainder of the loan would be far less.  (Assuming you've been paying the loan for a year, and have £11,500 left, you'd pay a total of £3300 more interest, and likely under 5k in total)

Thank you for this Capuchin - I guess I have just documented it the best way for me to see my progress. When I look at it online - the interest has all been front loaded? - The total debt is circa £27k but the full £327 repayment comes off every month. If however I was to redeem it at any point there would be a reduction in interest for that period if that makes sense. 
So if I do make any overpayments (my intention is to do this in £500 lump sums) but I don't make any adjustments then it should be more positive than my figures show? 

Dorisd

It was not easy at times, but we are getting there. Being on the forum and Dave Ramsey method (I don’t agree with his politics etc) really helped me to focus on what I wanted in the future. 

Getting on the forum and this diary will really help you work out what’s best for you, you will have access to some really knowledgeable people and get to read inspiring stories. It’s been a godsend for me especially when I wanted to give , which happened almost daily!

capuchin

Lifestartsat40 said:

capuchin said:

Lifestartsat40 said:

capuchin said:

I think one of our calculations is way off! I'm assuming 13.8% apr, which is 1.115% monthly (0.138/12) and then multiplying that by 17500 which gives me 201.25. Amortisation will bring that down over time, but if your interest monthly is £112 then I believe you have the headline figure incorrectly listed.

In which case it may be worth paying the home improvement loan first.

I see no way that you can be paying £112/month. (Though I did just have a thought that perhaps you're calculating 13.8% total (£1344) and then dividing it by 12 to assume the interest rate. That would work only if you were paying the loan off in 1 year as the interest would taper down sharply through amortisation.

I did it by taking my monthly payment of £327 x 84 payments = £27,468 
Original loan was for £18,000 = £9468 is interest  - I then divided that by 84 payments which gives £112 interest each month? 

Aha. £112/month on average. So right now, you are paying over £200/month interest as you owe a lot, but towards the end of the loan a lot less (say 6 months left when you owe £1500, your interest will only be £17.25 in that month as an example). Imagine a graph with the x axis as your time left on the loan, and the y as the interest you pay each month. It's a straight line down directly proportionate to the remaining debt.

So say as an example you managed to hunker down for the next 6 months and pay off £6000, the interest over the remainder of the loan would be far less.  (Assuming you've been paying the loan for a year, and have £11,500 left, you'd pay a total of £3300 more interest, and likely under 5k in total)

Thank you for this Capuchin - I guess I have just documented it the best way for me to see my progress. When I look at it online - the interest has all been front loaded? - The total debt is circa £27k but the full £327 repayment comes off every month. If however I was to redeem it at any point there would be a reduction in interest for that period if that makes sense. 
So if I do make any overpayments (my intention is to do this in £500 lump sums) but I don't make any adjustments then it should be more positive than my figures show? 

Exactly. Currently, of the £327 you pay each month, over 70% is to service the interest, and a little pays the capital. Over time as the capital sum owed gets less that inverts itself. This is how they make their money, and why it's in their interest to do it over longer terms.

If you could introduce £500 extra payments, each one would reduce your monthly interest (for the remainder of the loan) by £5.70 a month. To put this into perspective, if you had 80 months left on the loan now, you'd save  over £450 in interest [over the term of the loan] by making an immediate £500 payment.

Lifestartsat40

Put like that, I'll be sending £500 across as soon as I can