Which debt first? - help

I_can_do_it

I have the following debt and looking for advice. I’m due to inherit £7k which I want to use to towards my debt. My aim to reduce my monthly outgoings on the debt by September as I’m due to remortgage in October so having more each month will be better I think for my mortgage application. I need advice as not sure how to use the £7k on which debt. 

£5200 - loan (2.8%), monthly payment of £357 a month due to end approx May 2026.

£3,600 - Lloyds credit card 1 (29.62%), monthly payment of £100.

£6,000 - Lloyds credit card 2 (0% ends June 2025), monthly payment of £150.

£7,000 - HSBC credit card (0% ends May 2026), monthly payment of £176. 

I would welcome views on this as I’m going round in circles trying to work out how to go about this.

thank you 

Grumpelstiltskin

If you remortgage with the same lender you shouldn't have any problems anyway.

Personally I would clear Lloyds 1 then balance on to Lloyds 2, do you know how much interest that will go to after 0% runs out?

I_can_do_it

Thanks, the other Lloyds card will go to 20% after the 0% finishes. 

Would you do anything with the Sainsbury’s loan? I was thinking of possibly paying off a lump sum to reduce the term so I can get it paid quicker so it will release the £357 per month I’m paying, so I can pay that towards the other debt?

Grumpelstiltskin

Check the details on the loan to see if there are any penalties for paying off earlier.

I_can_do_it

With the loan there is a penalty if I pay off completely before the end date. But if I make a lump sum payment I can either reduce the monthly payment and remaining term stays the same or reduce the term and monthly payment stay the same. So I was thinking should I make a lump sum payment to reduce the term and leave about 4 months of payments to make, that way I’ll have clearer the loan before I remortgage and I’ll have £357 to go towards the other debt. As it’s my largest monthly amount, although the interest is lower.

CliveOfIndia

Purely in terms of cold hard cash I have to agree with the other poster.  Clear the highest APR debt first, then put any remainder towards the other Lloyds card.  At the same time, also pay the £100pm you were paying towards Lloyds 1 towards Lloyds 2.  You want as little as possible remaining on that card come June, which is only 3 months away.

You then need to do whatever you can to clear the remaining balance as soon as you possibly can - ideally pay more towards it if you can, even if that means paying less towards the HSBC card (although obviously you must make the minimum payment each month).

I_can_do_it said:

As it’s my largest monthly amount, although the interest is lower.

I appreciate it can be tricky to see the woods for the trees at times.  But the loan is actually costing you relatively little in interest, so although it represents your biggest monthly outlay, it makes more financial sense to prioritise the higher rate debts.

And when it comes to the mortgage provider doing their affordability checks, they're more concerned with your overall outstanding debt, they're not really bothered about where that debt is sitting.