Best way to allocate £12,000 between creditors?

HDARD

Hi all,

Hope everyone’s doing okay.

I’m after a bit of advice on my situation. I’ve got a lump sum and I’m not sure of the best way to split it across a few credit cards to steady everything out.

I had to leave my job and things kind of snowballed. I had two accounts on payment plans (Tesco and MBNA).

Over the last few months I’ve sold a few things (gold, laptop, etc.) and now have £12,000 in cash. I just don’t know what should be tackled first or how best to prioritise it.

Right now I’m earning £1,700 a month. Once my course finishes in March, I’ll be applying for better paid roles and earning closer to £2,300.

Any advice on how to approach this would be massively appreciated.

TESCO - Card 1

• Balance: £2,800
• 25.7% APR
• Arrears: £183
• Minimum due: £210 (by 4th Feb)
• Default notice issued (so I assume urgent to pay the minimum before anything)

TESCO - Card 2

• Balance: £2,015
• Minimum due: £25
• Not currently in arrears

MBNA - Card 1

• Balance: £11,880
• 21.8% APR.
• Overdue minimum (incl. missed payments):
  £2,064
• At credit limit
• Payment plan in place for last 7 months

MBNA - Card 2

• Balance: £2,590
• 21.8% APR.
• Overdue minimum: £444
• Payment plan in place

VIRGIN MONEY

• Balance: £3455.51
• 26.49% APR
• No arrears but minimum is a fair bit

VIRGIN MONEY

• Balance: £975
• 23%
• No arrears

PAYPAL

• Balance: £1,550
• 0% promotional offers until March
• Minimum £65

Thank you in advance I am truly grateful for any advice.

la531983

Arrears clear off first
Then pay off highest interest rate ones after that.

Brie

PLAN  ONE

Have you asked for credit agreements for all of these?  If they can't provide them the debt isn't enforceable.  
Have you asked Tesco, MBNA & Virgin why you were allowed a second card when you likely had used your limit on the first card?  That's bad practice on their part allowing you to get into more debt than you can afford.  Ask if affordability checks were done.  They may have to concede they were wrong and write off either the debt or the interest.  

PLAN TWO if plan one doesn't work

If a default notice has been issued then normally there will be no interest charged.  So I would check the situation with Tesco 1.

What's the interest on Tesco 2 or has that defaulted as well?

MBNA 1 & 2
Are the payment plans agreed due to defaults?  If so double check if interest is being charged.  If they haven't defaulted I'd stick to the plan agreed for the time being.

Virgin 1 
High interest and not a huge amount due - pay it off (in my opinion)

Virgin 2 
Not really high interest but a relatively small amount due - pay it off (in my opinion)

Paypal
Check what the interest will be in March.  I suspect it will be stupidly high.  So keep the money ready to pay it off in full just before interest is started up again.  

So that's about half the amount.  If you're actually being charged interest on Tesco then I'd clear those as well.

HDARD

Brie said:

PLAN  ONE



PLAN TWO if plan one doesn't work

If a default notice has been issued then normally there will be no interest charged.  So I would check the situation with Tesco 1.

What's the interest on Tesco 2 or has that defaulted as well?

Thank you very much your reply! It is truly appreciated. I didn't know that I could ask the creditors why my limit was so high...

I can't seem to edit my post but there are no defaults in place thank goodness, just the letter came through saying if I need to pay for the arrears before this happens.

RAS

You'll need 10 posts before you can edit your posts. 

ManyWays

Asking the original lender for a CCA agreement is usually a waste of time unless the account is old.

i suggest getting a new job before you commit money from this pot to clear debts

MasterG83

I'm sure I've just read the exact same post about two minutes ago? Except then it was £6k lump sum and £6k consolidation loan. Were you not happy with the answers? 

sourcrates

Andyjflet said:

I'm sure I've just read the exact same post about two minutes ago? Except then it was £6k lump sum and £6k consolidation loan. Were you not happy with the answers? 

This thread you mean: How best to allocate £6k cash + £6k loan across cards? — MoneySavingExpert Forum

Guessing its the same OP under a different username, as the similarities are too many to be a coincidence.