Which is better to pay, credit card or loan

Paula1981

Hi,

At the moment i have a
Halifax cc at £3,876 outstanding, paid £142.72 per month, £45 is interest
Virgin cc at £2664.85 outstanding paid at £32.55 per month, £5.11 interest
Nationwide cc at £3,337.33 outstanding paid at £75.20 per month, £41.44 is interest

These are all paid on time but its the minimum

I also have
Nationwide loan at £2,165 outstanding, paid at £62.27 per month at 24.70%
Nationwide loan at £3,419 outstanding, paid at £137.54 per month at 3.9%

I have agreed a payment break on the 2 loans so these haven't been paid for 6 months.

I have £1,000 i want to use to pay towards the debts but i cant decide whats the better one to pay towards. Halifax being the biggest make more sense however i could pay almost half off the Nationwide loan or a good chunk off the virgin cc. Or do i pay a bit off of everything? I'm going round in circles, any suggestions please

sourcrates

Well before commenting on your question, what is your overall situation, are you struggling to pay these debts, its sounds like they are causing you sleepless nights, how are you for money generally, could that £1000 be put to better use elsewhere ?

You have nearly 16k in cards and loans, are you able to comfortably service these debts or are they becoming unaffordable ?

Do you rent, or are you a homeowner ?

It help to know your overall situation beforehand.

Paula1981

sourcrates said:

Well before commenting on your question, what is your overall situation, are you struggling to pay these debts, its sounds like they are causing you sleepless nights, how are you for money generally, could that £1000 be put to better use elsewhere ?

You have nearly 16k in cards and loans, are you able to comfortably service these debts or are they becoming unaffordable ?

Do you rent, or are you a homeowner ?

It help to know your overall situation beforehand.

I own my property outright which is probably the only reason i can sleep at night!

I am self employed, stupidly as a limited company. I took on a bar almost a year ago. renovated it & started trading in November 2022. My total debt is approx 22K, as i also have a previous business loan but that business closed in march 2022. I currently receive U/C, about £1,010 a month, this dosent cover our bills which is why i have agreed with the bank no suspend the loan payments. U/C is possibley due to stop in November as i would of been trading a year. The business on average take around £4k a month, enough to pay for its self & no more. So theres a good chance i will be closing the business by november.

No debt charities can help due to being a LTD company, I cant get a business loan as i dont have 2 years of accounts & my credit score is so awful i cant even do a balance transfer, no one will lend me any more money to consolidate the debts & i cant even get a secured loan/remortgage 

Grumpelstiltskin

Have you contacted Business Debt Line for advice?

Paula1981

yep, they didn't seam able to do anything either, 

MattMattMattUK

Paula1981 said:

I am self employed, stupidly as a limited company. 

You are employed, as a director and shareholder, you are not self-employed.

Paula1981 said:
I took on a bar almost a year ago. renovated it & started trading in November 2022. 

Are the nominal assets and trading under the limited company, but the costs on these credit cards relate to the cost of refurbishment?

Paula1981 said:
My total debt is approx 22K, as i also have a previous business loan but that business closed in march 2022

What was the structure of the previous business? Self-employment, ltd, ltd with personal guarantees?

For clarity, are those debts all personal or are some of them money in the name of the Ltd? If any of them are owed by the Ltd do you have any personal guarantees in place? 

Paula1981 said:
The business on average take around £4k a month, enough to pay for its self & no more. 

£4k pcm turnover is very low trade for a bar, what was your expected turnover in your business plan? Have you got options to increase trade and profitability, or do you feel you have already exhausted them all? Can you work around the bar being open, eg. is it worth closing it Mon-Thu and taking on a day job, only opening Thu and Fri in the evening, then all day Sat and Sun, allowing you to work full time away from the bar etc.?

Paula1981 said:
I cant get a business loan as i dont have 2 years of accounts & my credit score is so awful i cant even do a balance transfer, no one will lend me any more money to consolidate the debts & i cant even get a secured loan/remortgage 

Unfortunately you will not get a business loan after two years without being profitable and you could get one after six months if you were generating a healthy profit, but then you would not need one, such is often the way with lending. Taking on more debt personally is also unlikely to help, it may only make things worse. 

You need to properly evaluate the situation, that will involve a very hard look at if the business is viable and how you (and a partner if you have one, it is not clear if you do) can increase your income. From the way you are writing it also seems that you are making the classic mistake many small business owners do, which is failing to separate the personal from the business, you are not self-employed, business debts are separate from personal debts, personal borrowing on cards should not be used to fund business operations etc. You can lend the business money, but that is slightly different (eg. director's loans). 

ManyWays

Paula1981 said:

yep, they didn't seam able to do anything either, 

What did Business Debtline say, it may not have been what you wanted to hear, but they would have made some suggestions. 

Paula1981

debts are in my name as i couldnt get any finance in the business name. Im only open Friday-sunday to cut down over heads, i cant get a paid job because i dont have a single person to look after my kids & there is zero childcare on the island. my husband works down south to earn enough to cover the pub & wages. BD were going to look at options but more so a trust deed which my husband has already so he cant borrow any more money. They never called back with an update.

I was just really looking to see what people would pay off first if they had the spare cash

MattMattMattUK

Paula1981 said:

I was just really looking to see what people would pay off first if they had the spare cash

The most sensible answer will be pay the highest interest debts first, barring promotional rate expiry.

Paula1981 said:

debts are in my name as i couldnt get any finance in the business name. Im only open Friday-sunday to cut down over heads, i cant get a paid job because i dont have a single person to look after my kids & there is zero childcare on the island. my husband works down south to earn enough to cover the pub & wages. BD were going to look at options but more so a trust deed which my husband has already so he cant borrow any more money. They never called back with an update.

You are in a grey area because the debts are not business debts and I suspect that confusion is causing the issue with getting help. You might think of them as business debts because that is how you incurred the cost, but they are not debts legally owed by the limited company, but by you. Business Debtline will not be able to help you because the business has no debt (unless you have accounted for the business owing you the debt), but that is not something that can be helped with if you have. I suspect the issue with talking to debt charities is that you have told them that they are business debts when legally they are yours personally.

When you say "the island" are you in a tourist location, will the summer likely be a more profitable period? Do you rent or own the bar, if you rent could you negotiate a rent reduction? Have you been in touch with the local council's business development department? Whilst they will not be able to help you with the debts, they may well have other help, rate relief, grants etc. that could help, sometimes it can be surprising what is available.

When your husband covers the pub and wages, is he subsidising the pub as a loss making operation? With the wages you pay staff/yourself are you claiming the NI employment allowance? Am I right in guessing a Scottish Island? If so have you looked at the ICF? There are potentially other sources of help as well.

I know you are looking at the debt, but that may not be immediately solvable, however there could well be other ways to tackle the overall issues, increasing income, decreasing costs, grants and subsidies etc. It really is worth looking at it from every possible direction. 

RAS

OK, this looks like you are on a Scottish Island?

Scotland is different to many MSEer's experience. Just because of numbers.

stymied

I would keep the money as an emergency fund in case something breaks and needs replacing since it doesn’t sound like you’d have much access to credit in that eventuality.