Which of these debts should I pay off with a lump sum?

Markymcmarker

Hi there. I hope this is okay to post here.

I have two pretty big debts (to me anyway) I want to pay off. I have reduced them considerably over the past year and they're dropping pretty well.
One is PayPal credit (which is mine) that is £498 and the 25.9%APR  The monthly payment is approx £18 but that's the minimum. I normally pay about £30 a month. The minimum drops every month but I continue to pay 30 or odd times the minimum if I am short that month but that's VERY rare.

Second: was taken out in my name (by a 'friend') but I didn't have enough evidence to prove it was then sadly. It was for 1.2k It's now at 640 but to pay it off it would be £680. My monthly payment is £33. It doesn't drop at all and stars at 33.
Annual interest rate 26.28 (Fixed) but also says annual percentage rate 29.7%.

Now, I have just got £700 after a rebate. Which debt would I best to pay off? I've read on here and other sites you should plan on  which debt you pay off and not to pick one at random. I have autism and struggle with numbers so I'm struggling to see which one to pay off first. Sorry if I sound dumb.

Which would you pay off?

Option 1: pay off PayPal and use the rest to pay 200 off lloyds. then add an extra £20 a month to pay off Lloyds (£50 a month).

Option 2: pay off Lloyds fully and pay off extra on PayPal each month.

Option 3: split the money and pay half off of each.. which seems pointless to me?

Option 4: use that money for a holiday, bury my head in the sand for a week and come back and continue to pay them off monthly... Lol 

Would it be worthwhile messaging PayPal and asking if they'd settle for a lower amount if it was a one off payment? I've seen on here some places do that.. but it's somewhat rare.

Thank you for any help. 

fatbelly

There's not a lot of difference between options 1 & 2 but 2 shades it due to the higher apr

jackrack

Option 4 Option 4

Mark_d

I agree with @fatbelly. You should pay of (2) first because it's the most expensive debt.

Markymcmarker

jackrack said:

Option 4 Option 4

  It was SO tempting lol!

Markymcmarker

fatbelly said:

There's not a lot of difference between options 1 & 2 but 2 shades it due to the higher apr

Mark_d said:

I agree with @fatbelly. You should pay of (2) first because it's the most expensive debt.

Thank you both!! I'll pay that off first thing tomorrow morning! Least it's one big debt gone thank god! 

CliveOfIndia

fatbelly said:

There's not a lot of difference between options 1 & 2 but 2 shades it due to the higher apr

Agreed.  If you're looking at it purely in terms of cold hard cash, you'll save most overall by paying off the one with the highest interest rate.  Unless there are any early settlement penalties to take into account, which may sway things if the APRs are very similar.  Sounds like there may be a penalty on the second one?  But for the sums involved (from what you've said), it's six and two threes.

Markymcmarker said:

Would it be worthwhile messaging PayPal and asking if they'd settle for a lower amount if it was a one off payment? I've seen on here some places do that.. but it's somewhat rare.

Lenders won't usually accept a lower settlement unless you've already demonstrated that you're struggling to maintain your contractual repayments.  If they do give you a "discounted offer", so to speak, this will be recorded on your credit file and will impact your ability to get credit again in the future.

RAS

Option 2, and then increase your payments to Paypal afterwards. Maybe not the full £33, but at least £20? So that starts to reduce more quickly. 

It may only be £13, but transfer that to an instant access ISA. Even having £50 as an emergency fund is worth it.

enthusiasticsaver

Option 2 then up monthly repayments to PayPal to £50 after using remaining £200 from the rebate to reduce it to £440. It will be gone in 9 months.