Prioritising what debt to pay first

duchessdisconoodle

Hi there, I’m hoping for a bit of advice. 

I’ve been working at paying off approx £10k debt over the last year and a half. 

Currently my debt is split between

bank Loan @ £2,400 left to pay (£3,900 originally including £435 interest) and my monthly payments are £149 until December 2026. 

Credit Card @ £2,800, on a 0% interest balance transfer deal until January 2026. Currently paying £50 a month 
I also have about £500 debt on PayPal credit 

At the end of the year, I am due a bonus in work which will be £4k before tax so approx £2.5k after tax and I intend to use all of this towards debt. I’m unsure on which I should pay off first, or if it would be best to split this. 

If I were to pay my loan off in full from today it would mean only paying £2,185 so this would mean a reduction in my interest and no early payment fees, so I’m thinking that this could be more beneficial and it would allow me to make larger payments each month towards my credit card. 

I’m hoping to be debt free by the end of the year and this money will be a great help but I just want to make sure I’m using it efficiently 

thank you 

duchessdisconoodle

Just to clarify, hoping to be debt free by the end of next year or hopefully sooner 

ManyWays

I suggest clearing the Paypal debt first.

If I were to pay my loan off in full from today it would mean only paying £2,185 
You have that money in savings now? 
if you do, then surely all your debts can be cleared with this now and the bonus at the end of the year? 

duchessdisconoodle

 I don’t have any money in savings sorry each month I can only afford to make the monthly payments above. I just meant that the interest would be significantly reduced from the loan if i was to make an early payment

MEM62

duchessdisconoodle said:

I just meant that the interest would be significantly reduced from the loan if i was to make an early payment

The interest rate on your credit card will be significantly higher if that is not cleared by the end of the interest-free period.  Clear the CC first and then throw the payments you were making to that at your bank loan.  

Andyjflet

I would usually suggest smallest debt first, quick wins are good for the mind and soul, clear the Paypal credit, nasty people to do business with, and then the loan, then snowball those payments into the credit cards ASAP. Don't wait for your bonus, start paying the Paypal debt .... today!

kimwp

What is the Apr on your PayPal credit? What are the monthly  minimums on your debts and how much can you pay to your debts each month?

fatbelly

Plan your attack using this

https://www.lemonfool.co.uk/financecalculators/snowball-calculator.php

RAS

Agreed. You need to know what the APR and payments are going to be on that credit card as it ends in 6 months.

Altior

If you are disciplined, the obvious thing to do is an eligibility search for 0% deals, MT, BT or even purchase. You have until the end of the year to get one (or more). If so then you can use it to extend the 0% cc debt and pay the loan off earlier with the bonus.

The PayPal credit should be settled asap, assuming it's accruing high double digit interest.  

enthusiasticsaver

I would imagine the Paypal interest rate is quite high so I would clear that to start with.  If you think you will have no issue getting another 0% deal with the CC in January then I would clear the loan as it will save on interest.  However if the interest free deals are not forthcoming (do an eligibility checker which is just a soft search) then clear the CC then overpay the loan by the £50 you are currently paying to the credit card.