Advice on the right route

Katieann

Hello, I need some advice on what the best route is to try and be debt free. In total between myself and my partner we have a total of £27869 in debt plus interest.

Car finance - £12578 (pay half each)
My overdraft - £200 (£50 paid off a month)
Partners overdraft - £1000
My credit card - £1366 (£100 paid off a month)
Partners credit card - £500 (£100 paid off a month)
Store credit - £725 (£130 paid off a month) 
Joint loan - £11500 (£648 paid off a month)

As you can see it’s quite a lot and we were looking at the snowball technique but don’t even know where to start. Would a debt consolidation loan work better? We want to get it down as much as we can and as quickly as we can so we can properly start saving especially as we are paying just over £1000 a month in debts

sourcrates

You don`t quit booze by drinking more, likewise you don`t get out of debt by borrowing more, it`s not a recommended route to becoming debt free, you don`t include your earnings in your post, so we don`t know how long your current strategy will take, but I am assuming you are currently up to date with all payments, and have a reasonable credit report each, and you would most likely want it to stay that way.

Snowballing involves throwing all you can at a particular debt in order to clear it quicker, whilst still maintaining at least the minimum repayment on the debts as well, you apply this to each account in turn and you can clear debts much quicker this way, but you have to be very frugal with your budgeting to achieve this.

You don`t want to be going down the debt management path if all your debts are still affordable to you, if your outgoings exceeded your income, then that would be a different matter, you don`t mention if that is the case or not, I`m guessing its not, so I`d try and snowball what I could and see where you are in say 12 months time.

Katieann

sourcrates said:

You don`t quit booze by drinking more, likewise you don`t get out of debt by borrowing more, it`s not a recommended route to becoming debt free, you don`t include your earnings in your post, so we don`t know how long your current strategy will take, but I am assuming you are currently up to date with all payments, and have a reasonable credit report each, and you would most likely want it to stay that way.

Snowballing involves throwing all you can at a particular debt in order to clear it quicker, whilst still maintaining at least the minimum repayment on the debts as well, you apply this to each account in turn and you can clear debts much quicker this way, but you have to be very frugal with your budgeting to achieve this.

You don`t want to be going down the debt management path if all your debts are still affordable to you, if your outgoings exceeded your income, then that would be a different matter, you don`t mention if that is the case or not, I`m guessing its not, so I`d try and snowball what I could and see where you are in say 12 months time.

Thank you for your answer. In total it’s about £65,000 between us. I did wonder about the borrowing more as it seems silly but wasn’t sure if it’s easier if it’s all in one place and we can then put £1000 straight into that loan. It’s all confusing!

stu12345_2

£27000 or £65000.im confused.is the difference a mortgage 

Katieann

stu12345_2 said:

£27000 or £65000.im confused.is the difference a mortgage 

Sorry our income before tax is £65,000. No mortgage yet as we need to do more saving. Rent is £700 a month 

stu12345_2

well as long as you have some savings to start with.are you paying at least the min on your debts.it looks like you are or even more  than..are any in arrears .are any zero % interest rate. or mega low
they do say hit the one with the biggest interest rate .but the snowball method is hit the one with the smallest balance regardless what  interest rate.
which doesn't make financial sense.but makes psychological sense.if you get my drift.

Rob5342

Snowballing sounds like it may be and approach, IF you can keep it up. It looks like you could clear your overdraft, your partner's credit card and the store credit within 6 months That would free up £280 a month which could clear your credit card in 5 months if you threw it at that.

Do you have a sustainable budget and are you actually paying those amounts off, or do you end up dipping back into your credit?

RAS

What are the APRs on those debts? The OD are likely to be 35%+.

With respect to the car and the joint loan, when are the end dates?

And with both of those, are you allowed to pay them off early with penalty? Read the paperwork.

And what sort of car finance? HP, balloon payments etc?

EssexHebridean

I think a statement of affairs (SOA) would be of use to you - essentially it will get all your outgoings in one place and allow you to get a really clear picture of your actual expenditure. If you post the results in here then we would also be able to cat an eye over it and see if there are places we think you might be able to make savings - sometimes it's easier for people on the outside to see that! The link to the SOA calculator we recommend using is in my signature below, and once completed it has a "format for MSE" option - you can then copy and paste into the thread. 

Good work on getting your overdraft under control - personally I would focus on that, getting yours completely cleared and them tackling your partner's one. The reason for making these a priority is that an overdraft is a "dangerous" debt to have - it can be called in at any time and also really doesn't look great to mortgage lenders, so getting out - and staying out - of OD would be a good thing to achieve. 

I'll echo Sourcrates warnings against consolidation. It can work in some circumstances, but the combination of fairly good income, and comparatively high debt suggests that you may not be in those circumstances. Get your budget under control first, that should free up some additional money, and then you will be able to really make an impact. Finding out exactly how much surplus you have is the first key to this though. 

Have you checked (using the MSE Credit Club - which is free) whether there is a chance that you might be accepted for any 0% balance transfer credit cards to at least get the CC debt into a position where it's not costing you in interest? Again, that will make a difference to the speed you can pay it off.

I'd suggest reading back over your old threads too - there was great advice given then, and not much has changed when it comes to the best or right ways to tackle debt!