Am I doing the right thing with my debt

kragen_ironfist

Hi to you all. I hope some of you will have a minute to look at this and maybe suggest the best course of action for me to take.

I am 25 and, up until 2 years ago I was completely debt free. Then I met a girl who in 6 months cost me nearly £6,000. during this period I also needed a new car so rather than buy a banger that needed endless work I went for a newer car which cost me just under £5,000.

Currently I hold 3 Credit Cards

HSBC Platinum (£5,500 limit) they owe me 36p
Abbey National Platinum (£6,000 limit) they owe me 22p
Capital One Platinum (£8,000 limit) I owe them £4,997. and I am paying £200 per month (min payment approx £150)

I have transferred my balance twice and ended up on the Capital One card as I have interest fixed at 3.9% for the life of the balance.

I have one loan with Black Horse (this was arranged by the car dealer) for around £5,000 paid back at £113.50 per month over 5 years (I have had this for about 19 months now)

My bank accounts are as follows

Abbey Bank Account: £3,400 + £600 overdraft facility
HSBC Basic Bank Account: £10 ish
Abbey ISA: £500 ish I pay £50 per month into this account

as a guide to my earnigs my contract is for 50 hours a week at £5.70 per hour overtime is paid at flat rate however no lunch break is deducted. I take home after tax approx £1,200 per month

My outgoings are as follows per month

£325.00 Rent, I live in a room in a shared house
£200.00 Capital One Card
£200.00 Food due to the hours I work I tend to buy food on the go cost about £50 per week
£113.50 Black Horse (Car Finance)
£_40.00 T-Mobile Mobile Phone bill
£_40.00 Fuel for car
£_40.00 Pub Quiz (£10 per week)
£_40.00 Cinema (£10 per week)
£_25.00 NTL internet subscription
£_10.00 Ultima Online (Computer game subscription)

Now I could clear a huge chunk of my credi card debt if I wanted to but I think I am better off to keep paying the £200 per month until the Card balance is equal to or less thank my bank account - is this a good idea? my reasoning to do this was because it gave me a buffer in the bank should anything come up so I didn't have to spend more on credit cards.

My current problem is that due to some unexpected expenses I have been spending slightly more each month than I am earning so while my debt is decreasing so is my bank balance.

I suppose I could find a second job to earn a bit more money however I'm not really inclined to do so as I already work around 60-70 hours a week. I start at 07:00 on mondays and 05:30 tuesday-saturday finishing anywhere between 19:00-20:30 Monday-Friday and 12:00 on saturdays (the longest week I worked was 78.5 hours)

I have already identified one way I might save some money and that would be to make my own lunches I could prob save as much as £30 per week however I don't feel particularly inclined to do anything even eat when I get home after a 12-14 hour day.

I'm sorry if I've waffled a bit - can anyone suggest anything else I can try?

deemy2004

The sum is simple
If your earning more in interest on your savings than paying on your credit card then keep your savings and pay down your card as you are doing.

Why don't you balance transfer the debt to a 0% card ? admiteldly it is more work as you will then need to balance transfer whats left of the debt in 9 or so months time. But you will save maybe £300 in interest over the duration of your debt, if you continue to pay the debt down at the current rate.

kragen_ironfist

that is a fair point about the interest

the first card I got was the HSBC it was originally a joint card between me and my GF ( she was on £18k and I was on £12k (We NEVER used it), I maxed it paying my GF what I owed her (before she declared herself bankrupt for £28k) - that was my fault really - I should have told her to ---- Off! rather than pay her but I had no idea she had such debt problems and I'm to nice - I owed so I paid.

Then I transferred the balance to Abbey at this point I was still on £12k, they said they normally didnt give £5k cards to people on my income but, as I have banked with them for the last 10 years, if I could prove another bank had that given me that facility and I was keeping up the payments, they would match it - which they did.

when the 0% on that ran out I applied to Halifax and was refused even though my salary had increased to £15k

2 motnhs later I saw the Capital One ad and applied

Spendless

Re: the food bill. Are you aware that you can freeze sandwiches (depending on their filling) so you could just take out packet on way to work, be defrosted by lunchtime. Also would it be worth investing in a slow cooker? Come home to hot meal. There is a lot of ideas about this on oldstyle board.
Also pub quiz and cinema. Could you knock one down? Or alternate one week pictures, other pub quiz?
Good luck in sorting it out

kragen_ironfist

thanks for the ideas re food I'll go have a look

as for pub quiz and cinema - if possible I'd prefer to keep both as they are the only times i go out

i don't go to the cnema every week - depends whats on - bnut if I do its on a wednesday night (orange 2 fer 1 promo) with my GF

pub quiz is with my bro on a sunday evening. the rest of the time I spend at home - when I should really be meeting people

i've already cut out my fishing trips to save money i will try to cut down on what i spend on each tho - no popcorn at cinema - just ticket and less drinks at pub quiz

jat100

If you go to a UCI or filmworks cinema, no need to do without the popcorn, try this

Rafter

From the numbers you give, your most expensive debt is your car loan at about 14% APR.

You still have about £900 pounds in interest to pay on this loan in the next 3 1/2 years.

I'd think about paying this off from your current account if the loan repayment penalties aren't too bad.

This will immediately save you £113 per month in outgoings.

(There is no way you can earn 14% on your savings etc.)

The Capital one deal at 3.9% is good value. You can earn more than this on a good savings account. There is therefore little point in repaying this and I'd reduce it to the minimum payment.

Rather than maintaining your current account as your 'emergency fund' you have two options. Set up a high interest savings account where you will get a better return. Or, treat one of your unused credit cards as your emergency fund.

If you can keep a grip on your spending, this should allow you to transfer £163 per month to a high interest savings account each month earning up to 7% before tax.

I'd also close either your HSBC or Abbey card and see if Egg or Mint will offer you a zero % deal. You can then transfer this money to your savings account too to earn some more interest.

If Black Horse charge you 2 months penalty interest to pay off your car loan early, you are earning 1% on your current account and can earn 5% after tax on your savings, the combined effect of these changes will be to earn you an additional £1,000 over the next 3 years by which time you will have repaid your credit card and have over £10,000 in savings (a good step towards a house deposit perhaps?)

Good luck.

R.

kragen_ironfist

hi thanks for your help. just out of interest - anyone know of any good oden cinema offers its a bit of a way to UCI

kragen_ironfist

just had a look at the credit agreement for my car to see if I could pay it off - here are the gory details

£4985.00    Cash Value Of Goods
£___0.00      Payment Protection
£__50.00 (a) Cash Deposit
£_250.00 (b) Part Exchange
£2031.80 (c) Interest (17.3% APR)
£__95.00 (d) Acceptance Fee
£__50.00 (e) Documentation Fee

£4985.00 (1) Total Cash Value      
£_300.00 (2) Total Deposit             (a+b)
£4685.00 (3) Total Amount Of Credit (1-2)
£2176.80 (4) Total Charge For Credit (c+d+e)
£6861.80 (5) Repayment Balance (3+4)

59 installments of £113.53 + one final repayment of £163.53

so Far I have made 18 instalments a total of £2043.54

which from the above totals would leave £4818.26 to pay

how would they calculate a settlement fee when they appear to have added the interest to the start of the loan?

Rafter

Impossible to say what the penalties would be for paying off the loan early.

There are various ways including the imfamous rule of 78.

You definately shouldn't have to pay all the interest up front though.

From my sums, the £2000 you have paid so far is about 50% interest and 50% repaying the loan.

I think that means you owe about £3,800 on the loan still and they may charge early settlement fees - shouldn't be more than £4000 in total though.

Give the loan company a call and ask them for a settlement figure and then get back to us if it doesn't make sense or doesn't seem fair.

R.