Unexpected windfall - clearing debts help please!

dr_moomoo

I was recently made redundant and got a redundancy payout of about £2200. I have debts as follows:

Credit card 1 (no interest for the next 4 months, I think) with Natwest £670
Egg (16%) £511
Post Office (14% I think) £700

I also have two loans of £5k (now reduced to £3k) and £9k (now reduced to £6,500).

A friend lent me £300 a while back which I have now repaid so I have about £1800 to pay some debt off with. My plan was to pay off the Egg and Post Office cards, leaving some money to gather interest in my high interest account for a while and continue moving the Natwest balance onto interest-free cards when necessary (I have just checked my credit rating and it is excellent!). I saw Martin’s email today about the Barclaycard offer and thought that might be a good option.

However I am now wondering if it would be better to take advantage of the Barclaycard offer and pay off less debt allowing more money to accumulate interest?

I am nervous about getting this right as (as you can see!) I have not had a good financial past and I want to do the most sensible thing with this unexpected windfall (I’ve now got another, higher paying, job). At the same time I want to hold onto some so I can gather interest and have some savings. Life has been very difficult with the debt payments and I want to treat myself a little too, but not go wild!

Any advice gratefully received.

Many thanks!

bank_of_slate

Hi Dr

I would clear the Egg and Post office debts, PHONE THEM UP AND ASK FOR A FINAL SETTLEMENT FIGURE RATHER THAN JUST PAYING WHAT IT SAYS ON YOUR STATEMENT
Stick the rest in savings and review the situation after a couple of months when you can consider overpaying the other creditors
Just my opinion
Well done on your new job!
...Linda xx

macca64

What interest rates are you being charged on your loans? Is there an early repayment penalty if you pay them off early?

Without knowing the above, it hard to know what to do, but my first thought was to clear the Egg and Post Office credit cards, as they have the highest interest rate.

Although you can gain interest by no paying off your debts, you will get charged interest on the debts, so you need to work out if you can get a better rate on your savings than you pay on your debt.

MrsTinks

Personally then I don't believe in savings if you have debts
That is unless you have everything on 0% apr and then it's a different game really. Personally I'd pay the 3 debts off and maybe put half of those repayments each month into a savings account and put the other half towards paying the loans faster saving you money in the long term and allowing you a little saving for rainy days.

lynsayjane

ok my advice! I'd pay off the egg and post office cards straight away and put the remainder into a high interest account. Then in four months you should be able to clear most, if not all of the natwest one. then if possible you could begin saving up to make overpayments on the loans.

If your saying you have been stressed with the debt payments then I would definitely do this. also think of the psychological boost of paying off three debts!

dr_moomoo

Thanks very much for your advice. It's generally what I thought I should do but I wanted some objective outsiders' perspectives also! I couldn't pay off the loans at all with the money I have left but could clear most of the cards, and with the Natwest debt I will be able to keep shifting it onto 0% APR if I need to. But hopefully with the other debts paid off, I'll have more spare cash so I won't have to use my card (will keep 1 at a low limit and cut the others up) and pay off the Natwest debt faster too.

I can then look at attacking the loans.

Thanks again!

bank_of_slate

Good for you moomoo!
...Linda xx