Pay off loan or credit card?!

Elephantman21

Hi all,

first time poster with a bit of a dilemma…

I have 5k on a credit card and a loan of 2k that I am paying off monthly… 
I have managed to get around 2k from a savings payout, my question is am I better off paying some of the Credit card off or paying the loan off in full? 

The credit card is 0% interest with a minimum of around £60p/m while the loan is £77 for the next two years! I’m a bit confused what’s best! 

Any advice/help?!

ButterCheese

I'd pay off the one with the most interest.  So pay off the loan.  You can hunt around for another 0% balance transfer CC after your term is up.  My partner's been doing it for years on a £12k credit card.  She's just gpt her 3rd one with a £12k balance, 0% for 28 months.  Just check what the transfer fee is (usually around 1.5%) but that is cheaper than paying interest on the 2k loan I would think

ManyWays

If you have some other emergency funds, I would clear the loan, and then I would also increase the payment each month to the card by the £77 you are saving on the loan.

Claddagh_Noir

Personally, I would pay off the loan.  Take advantage of the 0% on the  credit card and pay that off before the interest kicks in (if possible).

MFWannabe

Elephantman21 said:

Hi all,

first time poster with a bit of a dilemma…

I have 5k on a credit card and a loan of 2k that I am paying off monthly… 
I have managed to get around 2k from a savings payout, my question is am I better off paying some of the Credit card off or paying the loan off in full? 

The credit card is 0% interest with a minimum of around £60p/m while the loan is £77 for the next two years! I’m a bit confused what’s best! 

Any advice/help?!

When does the 0% end on the credit card? 

enthusiasticsaver

I think what you do depends on your credit rating and the likelihood of getting another 0% deal on the credit card and when the existing deal finishes. 

If you don't have a bad credit history It makes sense to clear the loan with the £2k savings as you are paying interest on that. Then direct the £77 towards the credit card so that plus the existing £60 would clear the card in 3 years.

If the card deal expires before then and you are unable to get another deal then reducing the card makes sense as the rate is likely to be higher than the loan after the 0% period finishes. 

EssexHebridean

First question as Manyways says - do you have a robust emergency fund in place already? If not, then that 2k - or at least half of it - should go there. 

Next step - as es says above, check your likelihood of securing a replacement 0% deal when the current one ends - if that all looks OK then great, clearing the loan is sensible. 

On the card - set the monthly payment to a little above that current minimum (this is a card you're not using at all, yes?) and leave that slightly increased payment running - you will make far more impact on the balance by doing this than by using the set minimum payment and allowing it to drop with the balance, and it's also easier for budgeting. Sort of "stealth debt-busting"! 

LoulaBelle

Hiya, as ES above but I would add another £13 a month so you are paying back £150 a month off the credit card - I like nice round numbers.

MEM62

Pay off the loan and you have an additional £77 per month to pay off the credit card  :-)