I think I know the answer... Student loan v CC

Legacy_user

Hi peeps,

Well my insurance company finally paid out, after 6 months of messing about and I now have approx £1800 to put against my debts.

However, I am tempted to pay of my student loan of £129 a month because it has less than a year to go and I can just pay it off, wheras my CC is currently standing at £2300 with regular monthly payments of £70.

Now I know the interest is higher on the egg card but surely having £129 a month is better in terms of more cash per month than paying off most of the credit card.

I know I should pay off highest interest first but im in a quandry over this one

Cheers

Stu

skintchick

I'm in a quandary too...

Can you get a 0% cc and transfer your cc debt onto that? If so, then pay off your student loan, and use the £129 plus the £70 = £199 per month to pay it off in 12 months.

Otherwise it makes better financial sense to throw extra cash at the higher interest debt, ie the cc

BUT I also know you might feel much better having only the one debt to deal with, and as you say, it frees up the £129/month to help pay that off more quickly.

Can you post as to whether you can get a 0% cc so we know which is the best to advise?

gingercordial

Now I might be wrong (as I don't have my student loan stuff to hand) but I believe that even if you pay it off straight away the £129 monthly payments won't stop automatically. You'll have to contact the SLC and maybe the Revenue too (as they only seem to talk to each other at the end of the tax year) to get them stopped, then claim a refund of any overpayments that have been taken through PAYE in the meantime. According to the SLC website, refunds are not automatic! See https://www.slc.co.uk for details.

Personally I would pay off the credit card as that's costing you more interest, so more to pay off if you leave it. I don't generally think about the student loan repayments, they just happen and my take home pay is what's left afterwards.

System

Well peeps I phoned the SLC and I found out something very good actually. It is entirely possible to overpay at any time, as many times as you like via debit card/cheque your loan. The only stipulation is that it must me more than £5.

So therefore what I have decided to do is throw the excess cash at the credit card, but also overpay my student loan by £80 a month. This will more or less halve the time period required to repay my loan and then Im going to transfer the money left on my credit card to a northern rock base rate + 4% card to minimse the interest.

skintchick

Brilliant! Well done for getting a handle on your debt.

BUt can you not get a 0%cc instead of the Northern Rock loan?

System

skintchick, its not a loan its a credit card. No one will give me a 0%. Kinda strange really as I have no missed payments or anything and am a home owner too.

But 8.5% is much better than egg at around 13.9 I think. Tis costing me £20 a month in interest. !

skintchick

Ah, I see. Well then, well done! Although I'd have thought you could maybe get a better deal? Still, you're sorting it out which is cool.

HGLTsuperstar

13000 wrote:

Well peeps I phoned the SLC and I found out something very good actually. It is entirely possible to overpay at any time, as many times as you like via debit card/cheque your loan. The only stipulation is that it must me more than £5.

So therefore what I have decided to do is throw the excess cash at the credit card, but also overpay my student loan by £80 a month. This will more or less halve the time period required to repay my loan and then Im going to transfer the money left on my credit card to a northern rock base rate + 4% card to minimse the interest.

Yes you can overpay but it doesn;t actually get knocked off your loan until April when SLC forward all your payments to the Inland Revenue, (and keep note as payments have been known to get "mislaid" en route). Anyway the point is you cannot get an accurate figure of your remaining balance until April, and it doesn't impact on the interest as technically an overpayment you make in September isn't "received" for another 6 months (am I explaining this OK). The point is it would be better to stick all your "overpayments" in a high interest savings/ISA until about mid-March, then send it all in a lump sum to SLC (so interest has built up) then within a couple of weeks you'll know how much loan is left
Having said that, as a personal irk, I'm all for hanging off paying back the Chancellor as long as poss!