Savings or debt?

MoneyTalks84

Hi all, First time posting and looking for advice with debt vs savings with a view to trying to purchase a new car. 

 We have around £10,500 in debt
1. £3400 on c card with 8 months interest free left (£100 repayment a month).
2. Interest free sofas £1600 (no repayment currently but putting money aside each month so we have this amount when interest free runs out)
3. Personal loan £5680 (£170 per month and will have a charge to repay early. 

We have £21000 in savings.

£12000 in premium bonds with very little return
£8000 in a low interest savings account that we dip into as and when and some of it is put aside for annual payments e.g car insurance.

Would you pay all or some of the debt off with the savings? I like the idea of keeping some as a buffer for emergencies. 

Would you use the rest of the savings to buy a car or do a lease/get a loan to spread the costs? Looking at a £15k range car.

We also want to borrow more on our mortgage in October for renovations so keen to reduce our debt so we can borrow more!

Thank you for any advice you can offer.

ManyWays

I suggest buying the car with your savings; taking a car on finance adds to your outgoings so it reduces what you may be able to borrow for renovations

fatbelly

Buying a car is a poor investment because of depreciation. You compound the problem if you use an interest bearing loan to buy it. I agree to buy  with savings and not spend so much

Credit card debt can be rolled around 0% balance transfers provided you have reasonable credit history.

You already plan to pay off the sofas when the interest kicks in

That leave the personal loan with the early redemption charge and you need to do some sums on that one

DankVielen

MoneyTalks84 said:

Hi all, First time posting and looking for advice with debt vs savings with a view to trying to purchase a new car. 

 We have around £10,500 in debt
1. £3400 on c card with 8 months interest free left (£100 repayment a month).
2. Interest free sofas £1600 (no repayment currently but putting money aside each month so we have this amount when interest free runs out)
3. Personal loan £5680 (£170 per month and will have a charge to repay early. 

We have £21000 in savings.

£12000 in premium bonds with very little return
£8000 in a low interest savings account that we dip into as and when and some of it is put aside for annual payments e.g car insurance.

Would you pay all or some of the debt off with the savings? I like the idea of keeping some as a buffer for emergencies. 

Would you use the rest of the savings to buy a car or do a lease/get a loan to spread the costs? Looking at a £15k range car.

We also want to borrow more on our mortgage in October for renovations so keen to reduce our debt so we can borrow more!

Thank you for any advice you can offer.

I suspect that paying off the loan offers very little saving in interest.

Assuming Credit Record can take 2 months to filter down to lenders take action 2 months prior to when you plan to borrow more on your mortgage.

Figure out what your credit score actually is now by taking a trial with firm like experian, do not forget to cancel.

Often debt position is measured by what percentage of your debt you are using 75% to 80% of credit limit suggests startling to lose grip.

You do not say how much you need for renovations?

The simple fact is no interest or ISA is going to pay you as much as you will be charged for borrowing, so the best way to get a good return on your money is clearing debt where there is a reduction in interest or saving interest completely.

So I would be minded to get a zero percent card to pay off the sofa and refinance the Credit Card, so £5k credit limit required.

Forget the car, manage with what you have or get a cheap 2nd hand car taking care not to get a money pit. I bought a car for £3k, spent about £3k on it in 7 years, with a little TLC I could probably get £2k to £3k for it as it is ULEZ compliant.  

The reason I say forget the car is need vs want, renovations give an ROI when you sell the property, a car just depreciates and is not needed now.

Then consider how much you really need for the renovations and what the ROI is.

I know people who have used zero percent cards to renovate plus £30k of cash savings, if I remember rightly budget was around £70k, spent closer to £100k as they ended up getting new wiring, boiler and kitchen plus some features to save energy. They reduced the energy rating from E to C which opens up Landlords as potential buyers.  They increased value of flat from £530k to £850k with extension that made extra bedroom.

Already planning to rinse n repeat on a house, buying £1m adding 2 bedrooms with target valuation of £1.4m at today's prices, probably £1.5m if they sell within 2 years or they may stay for longer.