Biggest Impact

Niknac

Hi, I have the below debts. I have just received £1,000 from a family member. Which debt would you apply this to, to have the biggest impact. I struggle every month to meet the minimum.

Thanks 

Balance  Date   APR     Minimum payment     £           944.97  06.11.23    37.27     £40.00    £        1,648.56  06.11.23    32.90     £100.00    £        1,315.29  06.11.23    30.34     £80.00    £        2,579.45  06.11.23    26.49     £100.00    £        2,742.33  06.11.23    23.90     £130.00

sourcrates

Non of them, I'd stick it in an emergency fund, and keep it for a rainy day.

If you struggle to meet the min payments, have you considered your other options?

Dependant on your circumstances, you could opt for debt management, or a DRO possibly, no use throwing away a grand on those debts, it`ll just be swallowed up in interest.

fatbelly

You are allowed up to 2k in cash and assets in a DRO, and a separate 2k car if you have one.

The problem is if you are struggling to meet the payments on 9k of debt, you will struggle on 8k of debt, and will probably be back to 9k soon.

Maybe run the whole situation past National Debtline or similar

Brie

Just to give another slant on things....

You might want to sling most of the money received on the smallest debt of £944+.  This has the highest interest so that will make the biggest change for you.  At this point if you're paying £40 a month there's actually only about £10 going against the balance as the rest is interest.  

You might then stick to minimum + £1 on the 3 with the lower interest rates and pay as much as you can on the £1648+ debt as having the next highest interest rate.  If you continue to pay just the £100 on this it will take about 18 months to get it to zero.  If you use the £40 available from the first debt and pay £140 you'd clear it in a year.  

Then just keep working your way down the list.  I can never remember if this is snowballing or avalanching or some similar term....anyways it worked for me.  

But all of this is dependent on you controlling your current spending so as to not generate more debt elsewhere.  That's where a debt/budget adviser might help.  NationalDebtline, Stepchange, Citizens Advice, CMA....

fatbelly

It's snowballing. But the problem here is that blowing the £1000 only generates £40 per month which is less than £10 per week

You're starting with a very small snowball.

You can put the figures in here to see how long it will take

https://www.lemonfool.co.uk/financecalculators/snowball-calculator.php

RAS

I'd agree with fatbelly and sourcrates. With those sort of interest rates, you will really struggle to have any meaningful impact on your debts longer term with that sort of payment.

If you use it as an emergency fund, you can break the cycle. If you are paying £450 per month in interest, it may be that you exceed the £75 excess requirement for a DRO.

Stop paying the debts, put most of the money you were paying away as a fighting fund and when the creditors default, pay them a monthly amount, say half the current amount. Even if you can't get full and finals, you'll only pay back the £9-10k in total. You're currently paying half that in interest per year.

If you can get a discount even better.