Should i utilised inheritance to clear debt?

Dobbie1999

First time poster looking for some help / guidance. Having been irresponsible with credit acquired over the past 10 years, I have a significant amount of personal debt outstanding with multiple creditors, including a substantial amount also owed to parents, who previously bailed me out and have been very forgiving. I have worked hard to change my spending/borrowing mentality and have been making indentations into clearing the debt.

Reason for post is, I’ve recently inherited £8000 which currently sits in an Investment Bond and I feel that I would be better to reduce my personal debt using this money, rather than it sitting there and run the risk of returning to old habits and spending what isn’t necessary. In the next 12/24 months, we are hoping to move house as a family, so this is the motivation behind wanting to clear down the debt promptly, though I also acknowledge retaining the money for the house move may also be worth considering.

I’ll begin with the current incomings/outgoings:

Net Income - £2229/month (annual gross income £34900)

Monthly outgoing commitments:

£900 – Mortgage/Bills (paid into joint account)

£150 – Car insurance and fuel (£40 ins / £110 fuel)

£193 – Zopa Loan

£120 – Zopa Credit Card

£60 - Lloyds Credit Card

£200 – Childcare costs

£57 – Mobile Phone

£40 – Subscriptions (Unison, Apple Music, Amazon)

£250 – Repayment to parents

£25 – Very Credit

£25 – Novuna Finance

£30 – Paypal Credit

Total – £2050

Net monthly balance - £179

 

Few points to note: fuel is based over a 3-month average, phone bill moving to sim only in a few months (£20), credit cards payments are only ‘minimum’ amounts each month.

 

Outstanding Debt:

Zopa Loan – £4825 (final repayment Jan 2026 – 25 months)

Zopa CC - £3957

Paypal Credit - £724

Lloyds CC - £1150

Halifax O/D - £750

Novuna Finance (0%) - £300

Very - £417

Parents - £20000

Total Debt - £32123

  

Whilst I’m looking for opinions on whether this is a practical idea, my initial thought is to pay off the balances on the following:

Lloyds CC - £1150*

Zopa Loan - £4825*

Paypal - £724*

Halifax OD - £750*

Very - £417

Total - £7866

*These are the accounts I would intend on closing/removing, once balanced is settled.

Paying off the above would reduce current monthly outgoings by £308 and I would then increase what I can pay off the Zopa CC, bringing the balance down a bit quicker by paying more than the minimum amount each month. The monthly breakdown would then be:

 

Net Income - £2229/month (set to be £2279 come April 2024). 

Monthly outgoing commitments:

£900 – Mortgage/Bills (paid into joint account)

£150 – Car insurance and fuel

£300 – Zopa Credit Card

£200 – Childcare costs

£57 – Mobile Phone

£40 – Subscriptions (Unison, Apple Music, Amazon)

£250 – Repayment to parents

£25 – Novuna Finance

Total – £1872

Net monthly balance - £307

Remaining Credit 

Zopa CC - £3957

Novuna Finance (0%) - £300

Parents - £20000 

Total Debt - £24257

 

I appreciate a lot will depend on my own discipline, but I believe I’m in a healthier place with my mindset on spending and the ‘ball and chain’ effect it has had on me, along with all the embarrassment and shame I have brought upon myself. With the surplus amount, the plan is to restart the saving process of putting a set amount into Premium Bonds to begin with.

Based on reading other posts, I hope I’ve included what is expected for some but please let me know if I have missed anything that would help with any guidance.

Thank you in advance.

Veteransaver

Generally you should just pay the most expensive debt off first.
Your debt isn't too bad, apart from the one to your parents and you are paying that back too as part of your monthly outgoings, you'll get there.

Dobbie1999

Veteransaver said:

Generally you should just pay the most expensive debt off first.
Your debt isn't too bad, apart from the one to your parents and you are paying that back too as part of your monthly outgoings, you'll get there.

Thank you for such a swift response.

The one to my parents isn't on my credit file, nor does it carry any interest, though i'd like to think i will adda few extra payments on at the end...

Am i better to pay the CC off or the loan? The reason for paying the loan off instead of the CC, is due to higher monthly payments. Obviously aim to increase my monthly payment towards my CC if i pay the loan off, but if for whatever reason an unexpected bill came in, i wouldn't have to commit as much to the CC as i would done the loan each month.

13thlegion

Essentially you are asking if you should use the inheritance to kick start a snowball effect.

I can understand feeling torn. As you feel that debts have come from mistakes it stings that the £8000 could 'disappear' in clearing debts. 

How about this? What is the timeline to clear without the inheritance? Then, even after using it do you think you can be disciplined enough to not use the extra monthly cash available when debts are cleared? That way when you reach the end of the original, no inheritance timeline you will have saved that amount back, and avoided paying some interest. 

I'd also suggest paying of balances with highest interest with the inheritance first but that is entirely up to you.

Edit: And if you don't have an emergency fund, use the inheritance to set that up first, so that way you can avoid the need to use credit as much as possible.

MFWannabe

Dobbie1999 said:

First time poster looking for some help / guidance. Having been irresponsible with credit acquired over the past 10 years, I have a significant amount of personal debt outstanding with multiple creditors, including a substantial amount also owed to parents, who previously bailed me out and have been very forgiving. I have worked hard to change my spending/borrowing mentality and have been making indentations into clearing the debt.

Reason for post is, I’ve recently inherited £8000 which currently sits in an Investment Bond and I feel that I would be better to reduce my personal debt using this money, rather than it sitting there and run the risk of returning to old habits and spending what isn’t necessary. In the next 12/24 months, we are hoping to move house as a family, so this is the motivation behind wanting to clear down the debt promptly, though I also acknowledge retaining the money for the house move may also be worth considering.

I’ll begin with the current incomings/outgoings:

Net Income - £2229/month (annual gross income £34900)

Monthly outgoing commitments:

£900 – Mortgage/Bills (paid into joint account)

£150 – Car insurance and fuel (£40 ins / £110 fuel)

£193 – Zopa Loan

£120 – Zopa Credit Card

£60 - Lloyds Credit Card

£200 – Childcare costs

£57 – Mobile Phone

£40 – Subscriptions (Unison, Apple Music, Amazon)

£250 – Repayment to parents

£25 – Very Credit

£25 – Novuna Finance

£30 – Paypal Credit

Total – £2050

Net monthly balance - £179

 

Few points to note: fuel is based over a 3-month average, phone bill moving to sim only in a few months (£20), credit cards payments are only ‘minimum’ amounts each month.

 

Outstanding Debt:

Zopa Loan – £4825 (final repayment Jan 2026 – 25 months)

Zopa CC - £3957

Paypal Credit - £724

Lloyds CC - £1150

Halifax O/D - £750

Novuna Finance (0%) - £300

Very - £417

Parents - £20000

Total Debt - £32123

  

Whilst I’m looking for opinions on whether this is a practical idea, my initial thought is to pay off the balances on the following:

Lloyds CC - £1150*

Zopa Loan - £4825*

Paypal - £724*

Halifax OD - £750*

Very - £417

Total - £7866

*These are the accounts I would intend on closing/removing, once balanced is settled.

Paying off the above would reduce current monthly outgoings by £308 and I would then increase what I can pay off the Zopa CC, bringing the balance down a bit quicker by paying more than the minimum amount each month. The monthly breakdown would then be:

 

Net Income - £2229/month (set to be £2279 come April 2024). 

Monthly outgoing commitments:

£900 – Mortgage/Bills (paid into joint account)

£150 – Car insurance and fuel

£300 – Zopa Credit Card

£200 – Childcare costs

£57 – Mobile Phone

£40 – Subscriptions (Unison, Apple Music, Amazon)

£250 – Repayment to parents

£25 – Novuna Finance

Total – £1872

Net monthly balance - £307

Remaining Credit 

Zopa CC - £3957

Novuna Finance (0%) - £300

Parents - £20000 

Total Debt - £24257

 

I appreciate a lot will depend on my own discipline, but I believe I’m in a healthier place with my mindset on spending and the ‘ball and chain’ effect it has had on me, along with all the embarrassment and shame I have brought upon myself. With the surplus amount, the plan is to restart the saving process of putting a set amount into Premium Bonds to begin with.

Based on reading other posts, I hope I’ve included what is expected for some but please let me know if I have missed anything that would help with any guidance.

Thank you in advance.

You need to put the interest rates against each debt so we could advise best 
Possibly pay half of the debts and half into high interest savings account but we would need to know the interest rates on the debts first to know if that was a good idea or not 

Little_bit_taller

What are the APRs?

katsu

I would look at the money you are spending on the subscriptions and cancel the amazon and or apple. 

Can you drive a bit less to reduce fuel or reduce any household bills to get DF a bit quicker? 

Also, close the Very account too.  They aren't great value. Use TK Maxx or the supermarkets instead. 

kimwp

Check if there are any penalties for paying off your loans early. Otherwise, keep some back for an emergency fund, unless you have one already and pay the rest towards your debts, starting with the highest interest one first.

fatbelly

Can you get any of that to 0%?

For example, Nationwide give 0% overdraft for a year

https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/#overdrawn

The are 0% BT offers on credit cards lasting up to 29 months

https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/#longest

enthusiasticsaver

You have not put interest rates on those debts and it would help to know what interest you are getting on the investment bond and indeed whether you can even access it.  If it is a bond it may not be accessible until the maturity date. 

Dobbie1999

MFWannabe said:

Dobbie1999 said:

First time poster looking for some help / guidance. Having been irresponsible with credit acquired over the past 10 years, I have a significant amount of personal debt outstanding with multiple creditors, including a substantial amount also owed to parents, who previously bailed me out and have been very forgiving. I have worked hard to change my spending/borrowing mentality and have been making indentations into clearing the debt.

Reason for post is, I’ve recently inherited £8000 which currently sits in an Investment Bond and I feel that I would be better to reduce my personal debt using this money, rather than it sitting there and run the risk of returning to old habits and spending what isn’t necessary. In the next 12/24 months, we are hoping to move house as a family, so this is the motivation behind wanting to clear down the debt promptly, though I also acknowledge retaining the money for the house move may also be worth considering.

I’ll begin with the current incomings/outgoings:

Net Income - £2229/month (annual gross income £34900)

Monthly outgoing commitments:

£900 – Mortgage/Bills (paid into joint account)

£150 – Car insurance and fuel (£40 ins / £110 fuel)

£193 – Zopa Loan

£120 – Zopa Credit Card

£60 - Lloyds Credit Card

£200 – Childcare costs

£57 – Mobile Phone

£40 – Subscriptions (Unison, Apple Music, Amazon)

£250 – Repayment to parents

£25 – Very Credit

£25 – Novuna Finance

£30 – Paypal Credit

Total – £2050

Net monthly balance - £179

 

Few points to note: fuel is based over a 3-month average, phone bill moving to sim only in a few months (£20), credit cards payments are only ‘minimum’ amounts each month.

 

Outstanding Debt:

Zopa Loan – £4825 (final repayment Jan 2026 – 25 months)

Zopa CC - £3957

Paypal Credit - £724

Lloyds CC - £1150

Halifax O/D - £750

Novuna Finance (0%) - £300

Very - £417

Parents - £20000

Total Debt - £32123

  

Whilst I’m looking for opinions on whether this is a practical idea, my initial thought is to pay off the balances on the following:

Lloyds CC - £1150*

Zopa Loan - £4825*

Paypal - £724*

Halifax OD - £750*

Very - £417

Total - £7866

*These are the accounts I would intend on closing/removing, once balanced is settled.

Paying off the above would reduce current monthly outgoings by £308 and I would then increase what I can pay off the Zopa CC, bringing the balance down a bit quicker by paying more than the minimum amount each month. The monthly breakdown would then be:

 

Net Income - £2229/month (set to be £2279 come April 2024). 

Monthly outgoing commitments:

£900 – Mortgage/Bills (paid into joint account)

£150 – Car insurance and fuel

£300 – Zopa Credit Card

£200 – Childcare costs

£57 – Mobile Phone

£40 – Subscriptions (Unison, Apple Music, Amazon)

£250 – Repayment to parents

£25 – Novuna Finance

Total – £1872

Net monthly balance - £307

Remaining Credit 

Zopa CC - £3957

Novuna Finance (0%) - £300

Parents - £20000 

Total Debt - £24257

 

I appreciate a lot will depend on my own discipline, but I believe I’m in a healthier place with my mindset on spending and the ‘ball and chain’ effect it has had on me, along with all the embarrassment and shame I have brought upon myself. With the surplus amount, the plan is to restart the saving process of putting a set amount into Premium Bonds to begin with.

Based on reading other posts, I hope I’ve included what is expected for some but please let me know if I have missed anything that would help with any guidance.

Thank you in advance.

You need to put the interest rates against each debt so we could advise best 
Possibly pay half of the debts and half into high interest savings account but we would need to know the interest rates on the debts first to know if that was a good idea or not 

Thank you for everybody’s response suggestions so far. In regards to the APR on each:

Zopa CC 19.4%

Lloyds CC 30.34%
Very 59.9%
Halifax OD 39.9%
Paypal 23.9%

Parents 0%

Novuna 0%