Just deciding... which way round to pay these off....

Highlanddream

Will finish paying off a credit card in Oct and I am deciding which to pay off next, realise it doesn't really matter. 

1750 on a 0% until April 27 credit card
8000 on a 5.9% loan. Ive 'paid' the interest on the loan already really, but understand it will affect the final figure. Approximately 28 months left. 

Avalanche or snowball ? 

I will be paying approximately 1000 a month off these two. 

GrumpyDil

Settling the loan early should result in you paying less interest overall.

And always if one is attracting interest and one isn't then you should pay the one that is attracting interest first.

YBR

Two approaches here: @GrumpyDilhas the better in terms of overall cost, and is what I'd do.

For some people a quick-win helps to encourage them to keep going, so for example splitting the £1000 pm two ways could pay off the credit card in 4 months while also paying down the loan, and give you the emotional lift to persist clearing the loan.

ManyWays

You are in a good position, not in such a mess that you need a quick win to reassure you that there may be a way forward. So I think you should aim to minimise interest and overpay the loan.

kimwp

April 27th or April 2027?

CliveOfIndia

Highlanddream said:

Ive 'paid' the interest on the loan already really

No you haven't - front-loading of interest is illegal.  Interest is calculated (either daily or monthly) on the outstanding balance, so if you make overpayments to the loan you'll be saving interest.

It's just that in the early stages of a loan, more of your monthly payments go towards the interest, and less eats away at the capital, just due to simple maths.  Over the term of the loan, the situation gradually reverses.

So the more you can overpay the loan, the more interest you'll save.

Just check whether any overpayments will reduce the term or the monthly payment.  Some lenders will take one approach by default, others will take the other approach.  But you should be able to ask them to do one or the other, whichever suits you best.

The only thing you need to bear in mind is that when your 0% credit card deal expires, you'll revert to the card's standard APR, which will likely dwarf what you're paying on the loan.  So however you approach it, you need to make sure you can pay off the card in full when the promotional rate expires.  If you're able to shift any remaining balance to another 0% card, then great - but you can't bank on being able to do so.

Highlanddream

ManyWays said:

You are in a good position, not in such a mess that you need a quick win to reassure you that there may be a way forward. So I think you should aim to minimise interest and overpay the loan.

I am thinking that is the way to go. I will then have to clear the card before the end of the 0%.

enthusiasticsaver

I would set the credit card repayment at £100 a month so as to clear it by April 2027 so you won't need to transfer it and pay the other £900 off the loan each month to minimise interest. 

Highlanddream

mmm, that is a good idea. 

 enthusiasticsaver said:

I would set the credit card repayment at £100 a month so as to clear it by April 2027 so you won't need to transfer it and pay the other £900 off the loan each month to minimise interest. 

Highlanddream

CliveOfIndia said:

Highlanddream said:

Ive 'paid' the interest on the loan already really

No you haven't - front-loading of interest is illegal.  Interest is calculated (either daily or monthly) on the outstanding balance, so if you make overpayments to the loan you'll be saving interest.

It's just that in the early stages of a loan, more of your monthly payments go towards the interest, and less eats away at the capital, just due to simple maths.  Over the term of the loan, the situation gradually reverses.

So the more you can overpay the loan, the more interest you'll save.

Just check whether any overpayments will reduce the term or the monthly payment.  Some lenders will take one approach by default, others will take the other approach.  But you should be able to ask them to do one or the other, whichever suits you best.

The only thing you need to bear in mind is that when your 0% credit card deal expires, you'll revert to the card's standard APR, which will likely dwarf what you're paying on the loan.  So however you approach it, you need to make sure you can pay off the card in full when the promotional rate expires.  If you're able to shift any remaining balance to another 0% card, then great - but you can't bank on being able to do so.

 Quote from loan company: 

We will never actually charge you more interest than is included in the total amount payable. So once you’ve paid the amount of interest included in the total amount payable, your remaining monthly repayments will just pay off the loan amount.  

This is why we might not reduce the amount of interest we can charge. Because even though you’re repaying your loan early, the full amount of interest will have already been paid or become payable.

This is why I said 'I have "paid" the interest already' rather than explaining it all. 

Highlanddream

I am going to start on the loan next. The card will be easy to pay off afterwards.