Well done for being able to talk and to have already paid off the overdrafts (they can be nasty if they are recalled with next to no notice) as they are normally high cost, and to have reduced the loan to the point whete it is being paid off so early, that is really well done. Personally unless there are any very small debts that can be cleared within a month or 2, I would list them with the highest interest at the top, and send the overpayments to that debt first. To help with the budgeting I would set up a standing order for the credit cards to pay a round number that is going to be more than the current minimum payment. This allows the capital to naturally reduce a bit faster than if you do a minimum payment, and has the added bonus of showing as more than the minimum payment on the credit history, at a later date this may allow you to get a 0% balance transfer card so that you can save on interest. By paying the highest interest card or loan first you can save a lot long term. Very good luck with it, I am sure with the way you are working together it will reduce to a much more manageable level quickly
They are only bank loans, I have completely been against credit cards my entire life. Does that change how I should approach paying things off? In regards to interest etc.
You are very sensible and realise you both have to take responsibility which you are doing. My biggest suggestion is get a cast iron budget listing EVERYTHING. Make sure when paying off the debt you actually leave enough to live on. We spent years going gung ho then crashing when something "came up" when in fact we should have been budgeting for life's ups and downs. Since finding an appropriate budget for us we are paying off debt at a nice steady pace and have savings for life stuff. We just booked our service and mot and paid in cash a month early which feels great rather than having to book it after payday and hope we had the money. We have savings for annual spends and some general car maintenance etc and are starting to fund emergency savings as well as pay debt off.
Dedicated Debt Free Wanabee 🤓 Proud member of the Tilly Tidies since 1st Jan 2022 2022 -Jan £26.52, Feb £27.40, Mar £156.27, Apr £TBC
One of the loans I have worked my !!!!!! off in order to pay off NEXT MONTH! Which is 9months earlier than expected by the bank. I'm saving saving saving, then paying off in lumps, as long as I always have over a grand left in the account, for emergencies. I'm starting with the smallest loans first, so I feel that we actually have achievements and then it may not seem so bleak.
Do the loans have similar rates of interest? If any are charging higher interest than others it can be worth paying them off first.
It doesn't sound as though it applies to you, but if there are cash flow issues getting rid of debts with the highest monthly payments can have the biggest impact on monthly budgeting.
If you are paying high interest it can be worth keeping any credit card accounts open after you have cleared them and seeing if they will offer attractive balance transfer deals.
But a banker, engaged at enormous expense,
Had the whole of their cash in his care. Lewis Carroll
Well done for being able to talk and to have already paid off the overdrafts (they can be nasty if they are recalled with next to no notice) as they are normally high cost, and to have reduced the loan to the point whete it is being paid off so early, that is really well done. Personally unless there are any very small debts that can be cleared within a month or 2, I would list them with the highest interest at the top, and send the overpayments to that debt first. To help with the budgeting I would set up a standing order for the credit cards to pay a round number that is going to be more than the current minimum payment. This allows the capital to naturally reduce a bit faster than if you do a minimum payment, and has the added bonus of showing as more than the minimum payment on the credit history, at a later date this may allow you to get a 0% balance transfer card so that you can save on interest. By paying the highest interest card or loan first you can save a lot long term. Very good luck with it, I am sure with the way you are working together it will reduce to a much more manageable level quickly
They are only bank loans, I have completely been against credit cards my entire life. Does that change how I should approach paying things off? In regards to interest etc.
If you pay off the highest interest first, then over time you will pay less interest, so by throwing all the overpayments at a debt with an interest rate of 30% before one that has an interest rate of 5% you would save 25% a year interest on what you have paid. So, £100 overpaid for a loan at 25% is £25 saved in 1 year £100 overpaid for a loan at 5% is only £5 saved in interest That is very much simplified, but it gives you an idea of how paying the highest first can get rid of it fastest.
Credit card debt - NIL
Home improvement secured loans 30,130/41,000 and 23,156/28,000 End 2027 and 2029
Mortgage 64,513/100,000 End Nov 2035
2022 all rolling into new mortgage + extra to finish house. 125,000 End 2036
Well done for being able to talk and to have already paid off the overdrafts (they can be nasty if they are recalled with next to no notice) as they are normally high cost, and to have reduced the loan to the point whete it is being paid off so early, that is really well done. Personally unless there are any very small debts that can be cleared within a month or 2, I would list them with the highest interest at the top, and send the overpayments to that debt first. To help with the budgeting I would set up a standing order for the credit cards to pay a round number that is going to be more than the current minimum payment. This allows the capital to naturally reduce a bit faster than if you do a minimum payment, and has the added bonus of showing as more than the minimum payment on the credit history, at a later date this may allow you to get a 0% balance transfer card so that you can save on interest. By paying the highest interest card or loan first you can save a lot long term. Very good luck with it, I am sure with the way you are working together it will reduce to a much more manageable level quickly
They are only bank loans, I have completely been against credit cards my entire life. Does that change how I should approach paying things off? In regards to interest etc.
There are basically two approaches that are recommended: 1. Pay off the smallest loans first 2. Pay off the loans with the highest interest first In either case, you set the Standing Orders to pay (for credit cards, slightly more than) the minimum and focus on overpaying just one account until it's gone. Some prefer the first option as it allows them to feel they are making faster progress by getting entire debts paid off and more rapidly reduces the number of debt payments. The second option is the most financially beneficial as you will pay less interest overall. Personally, I'd opt for the second.
I think it's worth checking the terms of the loans, I've heard of there being penalties for paying loans off early (but this will usually just mean making sure you are a little bit savvy with how you pay. For example, I would have received an early repayment charge on my mortgage if I had paid the final payment by a lump sum - so I paid all but £6 as a lump sum and allowed the the final payment to go through on the DD and didn't get stuck with the charge.)
Well done for being able to talk and to have already paid off the overdrafts (they can be nasty if they are recalled with next to no notice) as they are normally high cost, and to have reduced the loan to the point whete it is being paid off so early, that is really well done. Personally unless there are any very small debts that can be cleared within a month or 2, I would list them with the highest interest at the top, and send the overpayments to that debt first. To help with the budgeting I would set up a standing order for the credit cards to pay a round number that is going to be more than the current minimum payment. This allows the capital to naturally reduce a bit faster than if you do a minimum payment, and has the added bonus of showing as more than the minimum payment on the credit history, at a later date this may allow you to get a 0% balance transfer card so that you can save on interest. By paying the highest interest card or loan first you can save a lot long term. Very good luck with it, I am sure with the way you are working together it will reduce to a much more manageable level quickly
They are only bank loans, I have completely been against credit cards my entire life. Does that change how I should approach paying things off? In regards to interest etc.
There are basically two approaches that are recommended: 1. Pay off the smallest loans first 2. Pay off the loans with the highest interest first In either case, you set the Standing Orders to pay (for credit cards, slightly more than) the minimum and focus on overpaying just one account until it's gone. Some prefer the first option as it allows them to feel they are making faster progress by getting entire debts paid off and more rapidly reduces the number of debt payments. The second option is the most financially beneficial as you will pay less interest overall. Personally, I'd opt for the second.
I think it's worth checking the terms of the loans, I've heard of there being penalties for paying loans off early (but this will usually just mean making sure you are a little bit savvy with how you pay. For example, I would have received an early repayment charge on my mortgage if I had paid the final payment by a lump sum - so I paid all but £6 as a lump sum and allowed the the final payment to go through on the DD and didn't get stuck with the charge.)
This is all SO SO helpful. Thank you so much.
So we have 5 loans, 4 all very very similar, one much bigger repayments. My parents have been very explicit in the fact they do not want to be repaid until we have paid our loans off, as they won't charge interest LOL.
We are incredibly lucky there is no cash flow issue. We can pay them back at whatever rate,If we wish, and still live comfy. The overdrafts were causing his stress, hence the reason we had no money for a while, now those are gone, we have no stress. But we are paying 1500 a month in debts that I would prefer not too. That's my need to get them paid off as fast as possible. So we can get back on track to saving for a mortgage! (Ithought we were getting quite close to having our deposit)
Two of the loans have no early payment fees. The others do! So that's something to consider now and to plan around.
You are very sensible and realise you both have to take responsibility which you are doing. My biggest suggestion is get a cast iron budget listing EVERYTHING. Make sure when paying off the debt you actually leave enough to live on. We spent years going gung ho then crashing when something "came up" when in fact we should have been budgeting for life's ups and downs. Since finding an appropriate budget for us we are paying off debt at a nice steady pace and have savings for life stuff. We just booked our service and mot and paid in cash a month early which feels great rather than having to book it after payday and hope we had the money. We have savings for annual spends and some general car maintenance etc and are starting to fund emergency savings as well as pay debt off.
So one of the VERY first things I did was look at EVERYTHING we pay a month, then looked at what we could instantly get rid of.
Then I made one of our accounts a savings account for paying off debts. One where all our money goes for bills. The savings account every month has money going in, we then make a decision as to what we NEVER go below each month. For example if there is 600 in there, we go no lower than 400. Meaning we have 200 to spend, to still enjoy life. Then the next month we add more and set a new target not to go below.
That way, our bleak situation isn't COMPLETELY bleak. But alwe are very aware an emergency may come up, like the car needing repairing etc, and we may have to use that money saved up in there and that's fine, because all the loans are manageable, now the overdrafts are gone. But ny end goal is to have them all paid off by no later than next Christmas.
I'm trying to stay positive. Lol. Harder than it seems but every month the situation will get easier. The very worst thing to happen has happened and every day we are closer to it being over. Only way to keep going, really!
Thanks for the tip, excellent advice. Its exactly what my dad told me to do. To still live and not deny all pleasure.
Two of the loans have no early payment fees. The others do! So that's something to consider now and to plan around.
If you are able to make any overpayments without extra fees those would be worth prioritising to make sure you maximise the payment without fees and don't miss a deadline for 10% overpayment a year or anything. Some used to have a loophole where you can pay a large chunk off, to avoid interest, but need to leave the last little bit to run.
But a banker, engaged at enormous expense,
Had the whole of their cash in his care. Lewis Carroll
Replies
My biggest suggestion is get a cast iron budget listing EVERYTHING. Make sure when paying off the debt you actually leave enough to live on.
We spent years going gung ho then crashing when something "came up" when in fact we should have been budgeting for life's ups and downs. Since finding an appropriate budget for us we are paying off debt at a nice steady pace and have savings for life stuff. We just booked our service and mot and paid in cash a month early which feels great rather than having to book it after payday and hope we had the money. We have savings for annual spends and some general car maintenance etc and are starting to fund emergency savings as well as pay debt off.
Proud member of the Tilly Tidies since 1st Jan 2022
2022 -Jan £26.52, Feb £27.40, Mar £156.27, Apr £TBC
Lewis Carroll
So,
£100 overpaid for a loan at 25% is £25 saved in 1 year
£100 overpaid for a loan at 5% is only £5 saved in interest
That is very much simplified, but it gives you an idea of how paying the highest first can get rid of it fastest.
Home improvement secured loans 30,130/41,000 and 23,156/28,000 End 2027 and 2029
Mortgage 64,513/100,000 End Nov 2035
2022 all rolling into new mortgage + extra to finish house. 125,000 End 2036
1. Pay off the smallest loans first
2. Pay off the loans with the highest interest first
In either case, you set the Standing Orders to pay (for credit cards, slightly more than) the minimum and focus on overpaying just one account until it's gone.
Some prefer the first option as it allows them to feel they are making faster progress by getting entire debts paid off and more rapidly reduces the number of debt payments. The second option is the most financially beneficial as you will pay less interest overall. Personally, I'd opt for the second.
I think it's worth checking the terms of the loans, I've heard of there being penalties for paying loans off early (but this will usually just mean making sure you are a little bit savvy with how you pay. For example, I would have received an early repayment charge on my mortgage if I had paid the final payment by a lump sum - so I paid all but £6 as a lump sum and allowed the the final payment to go through on the DD and didn't get stuck with the charge.)
So we have 5 loans, 4 all very very similar, one much bigger repayments. My parents have been very explicit in the fact they do not want to be repaid until we have paid our loans off, as they won't charge interest LOL.
We are incredibly lucky there is no cash flow issue. We can pay them back at whatever rate,If we wish, and still live comfy. The overdrafts were causing his stress, hence the reason we had no money for a while, now those are gone, we have no stress. But we are paying 1500 a month in debts that I would prefer not too. That's my need to get them paid off as fast as possible. So we can get back on track to saving for a mortgage! (Ithought we were getting quite close to having our deposit)
Two of the loans have no early payment fees. The others do! So that's something to consider now and to plan around.
Then I made one of our accounts a savings account for paying off debts. One where all our money goes for bills. The savings account every month has money going in, we then make a decision as to what we NEVER go below each month. For example if there is 600 in there, we go no lower than 400. Meaning we have 200 to spend, to still enjoy life. Then the next month we add more and set a new target not to go below.
That way, our bleak situation isn't COMPLETELY bleak. But alwe are very aware an emergency may come up, like the car needing repairing etc, and we may have to use that money saved up in there and that's fine, because all the loans are manageable, now the overdrafts are gone. But ny end goal is to have them all paid off by no later than next Christmas.
Proud member of the Tilly Tidies since 1st Jan 2022
2022 -Jan £26.52, Feb £27.40, Mar £156.27, Apr £TBC
Thanks for the tip, excellent advice. Its exactly what my dad told me to do. To still live and not deny all pleasure.
If you are able to make any overpayments without extra fees those would be worth prioritising to make sure you maximise the payment without fees and don't miss a deadline for 10% overpayment a year or anything. Some used to have a loophole where you can pay a large chunk off, to avoid interest, but need to leave the last little bit to run.
Lewis Carroll