I need help

GlitterGem17

I have a home essentials account with a balance of £1876.20. Minimum monthly payment is £80, I’ve been paying £100 to try to clear the amount but I’m being charged £45 per month interest. I have applied for 0% transfer fee credit cards but I was unsuccessful. I also have a studio account with a balance of £186. Minimum payment is £12 I usually pay £20. Interest is £5 per month. I’m really trying to save so I can clear the balances in full. I have saved enough to clear the studio balance but not sure if I should use this amount to pay a chunk off the home essentials balance? Is there any point in paying more than the minimum payment each month? Would it be better to put the extra money aside until I’ve saved up enough to clear the amount in full? Hope this makes sense?

Exodi

I appreciate the figures are rounded somewhat, but it appears both are at around 30% APR.

The Mathematicians would advise you to look at the interest rate of each debt and to use any extra money to pay off the one with the highest rate. Once that is cleared, focus on the next highest (aka snowballing).

The Social Scientists would advise you to look at the smallest balance and to focus on clearing that first. Once that is cleared, focus on the next smallest balance (the logic being that you will become increasingly motivated to clear them as the number of debts decreases - aka David Ramsey method).

The former is the most financially efficient and will have you out of debt the quickest, but requires financial discipline.

Before any of this though, as it's common on this board, I'd suggest posting a full 'Statement of Affairs' so that experienced forum members may be able to look at your situation as a whole (rather than focusing on these specific accounts). Fretting over where your extra £20 a month will go could be insignificant if you're paying £50+ p/m for a phone contract that could be sim only for a fraction of that, or you have an expensive £100 p/m Sky package that could be economised.

MorningcoffeeIV

GlitterGem17 said:

 Is there any point in paying more than the minimum payment each month? 

Yes - the point being that you would save bucketloads in interest.

Unless you're getting 30%+ on your savings, you should be making payments towards the (highest rate) debt whenever you have the funds.

GlitterGem17

Thank you so much. I will find out what the APR. My situation isn’t great. I’m a loan parent unable to work due to a school refuser. I’m on UC but once I pay everything I’m left with £100 of my overdraft which I use for gas and elec top ups and food. I get carers allowance each week plus child benefit and DLA every 4 weeks but with 2 growing boys aged 11 and 15 it doesn’t go far. My finances have taken another hit due to my eldest sons father passing away suddenly so my £200 maintenance payment a month has stopped. I have other debts which amounts £11,2229.26 🫣🤦🏽‍♀️ but studio and HE are the only ones with interest. 

GlitterGem17

APR for HE is 39.9% 
Studio is the same.
I have enough plus more saved to clear the studio account and close it to save further debt and interest, or should I use the amount the clear some of the balance of the higher amount. This would be £285 off of the HE balance which is £1876.20.

in_need_of_direction

How much is your od and what does it cost each month?

sourcrates

GlitterGem17 said:

APR for HE is 39.9% 
Studio is the same.
I have enough plus more saved to clear the studio account and close it to save further debt and interest, or should I use the amount the clear some of the balance of the higher amount. This would be £285 off of the HE balance which is £1876.20.

Have you considered a debt relief order at all ?

I think you may need a solution to remove all your debts, and put you in a better place financially, rather than concentrating just on one particular debt.

If you can fill in the statement of affairs, that will tell us what we need to know.

(The link is in my signature, below)

fatbelly

If you could post a statement of affairs that would help.

I'm not sure anyone has posted a link. It's 

https://www.lemonfool.co.uk/financecalculators/soa.php

Please format for mse.

It sounds like you need something a bit more heavy duty than snowballing - maybe a Debt Relief Order. It'll be clearer when we see the figures.

enthusiasticsaver

Overdrafts are the most expensive debt at 40% usually. Given your lack of income you may need a debt solution rather than trying to pay them off if you are then unable to manage without going further into debt. An soa will help us advise further. Do you rent or have a mortgage? Are you claiming all the benefits you are entitled to? 

If you intend to repay rather than do a debt solution you should pay off the most expensive debt first rather than saving. 

GlitterGem17

My OD is £450 and is interest free for another 4 months.
The reason why I’m concentrating on the 2 debts is because they are the only ones with interest.
My other debts are to a family member, or have the interest frozen. I took out a debt relief order in 2009.

in_need_of_direction

in that case, i'd clear the smaller debt then add what you have been paying to the larger debt payment.  maybe start some kind of a challenge to get the OD amount gathered up before the interest free period ends.