What order is best for clearing debts?

Trout69

Hi All,

Just a quck post for a bit of advice....i have a number of debts spread over varying cards, loans, catalogues etc and have just taken the step of cutting all my cards up and reducing my budget to try and get on top of it all....

Now my problem is where to start, shall i pay off the lower debts first to get them out of the way:

I.E my lowest 3 are £40 - Catalogue(which is the one i targeted first hence why it is so small), £117 credit card, £500 Catalogue (although i have a by now pay May 06 on this account for about £1300)

Now my initial thought was to pay these off first so i can concentrate 1 at a time on my bigger debts as below:

3 x Credit Cards average £2000 each
1 x Joint loan (ex partner) £4000
1 x Personal Loan £8000
1 x Business Loan £8000 - My business partner couldnt get any credit so its in my name for the time being even tho it was borrowed for business purposes.

I really really want to start clearing these up, and have been monitoring this site for a couple of months now. As well as paying off bits here an there when i can afford, i have really cut down my monthly expenditure by about £150-£200, i;ve cancelled my Sky subscription, taken my sposrts car off the road and am driving a T reg Corsa, reduced my mobile phone tarrifs (i have 2), cancelled all the extra's on my landline (3 way calling etc), changed energy providers (unfortunately just before Martin's email saying not too)...I'm also scraping together everything i don't use and selling it on ebay.

I'm 24 and i'm only going out socialising with friends maybe once or twice a month to keep costs low, or suggesting other things to do that cost less.

Every free offer i can think of i'm grabbing to see if i can maybe make some extra cash somehow.

Is there anything else i can do that i maybe have completely missed? I keep searching for more ideas, and just yesterday i started to look into the matched betting a bit deeper so fingers crossed with that one.

Any further suggestions tho people, just off teh tops of your heads, or from personal experience please through them at me, i'm deteremined to get out of this....and before i start claiming my state pension.

Thanks all

Donna

Willsnarf1983

sorry for the short answer but

sell ur sports car? what value is it?


u have plenty of time left assuming u don't keel over soon to buy another one


Will

Devo

Can you post APR details about each debt and this will help prioritise repayments

robnye

i would leave the matched betting.............. in case it doesnt work for you and you end of losing money......

Trout69

Hi all,

Regarding my sports car...its nothing flashy, an MX5 import 1993. So only worth a couple of grand, but it was damaged in an accident so still waiting for the insurance to sort it out so can't sell it i'm afraid.

With regards to my apr details here's a rough guide:

Joint Loan - ?? Unfortunately me and my partnet split up...i just know that the amount of the loan was £7500, it has been paid for around 18 months and there is approximately £4000 left i work out to be another 35 repayments at £112.

Personal loan - APR Approx 11.5% - This is a flexible loan with cahoot so i can repay more if required (altho i cant afford it at the minute)

Credit Card 1: This is purely used for a balance transfer credit card and holds approx £2000, APR's for teh balance transfers are all around 0.5% as this is llinked in with my graduate account.

Credit card 2: Cahoot credit card - APR 12% balance is £117

CRedit Card 3: VIrgin Credit Card - i have contacted them on a number of times to find out my APR it seems they are reluctant to share....

Credit Card 4: Egg - the APR on this is about 14% balance again about £2000

Now the business loan is in my name, and i am paying it at the moment, but this is due to the fact that i started a business a few months ago and am waiting for customers to pay there invoices (which is a little ahrde than it seems - thinking about offering a 2% discount if they pay within 14 days do you think that would work?). the APR on the business loan is approx 7%

Now i cannot get a loan to consolidate the debts, and i am just about managing the monthly payments.

I started to struggle when i my partner moved out. as im having to pay the rent on my own, i;ve moved 6 times in 5 years and feel settled where i am now, so if at all possible, i don't want to move....

I'll keep posting as and when information is required....

Donna

johannamse

Hey Donna,

You seem like your really committed. Well Done.

Could you rent a room out? You can make something like 4,500 a year tax free?

Does your partner owe you any money? COuld you give one of the CC to him?

I would offer 5% disocunt for quick payers. 2% is not an incentive enough.

Well DOne.

Trout69

Unfortunately i live in a one bedroom cottage - tried to rent teh bedroom out to a friend, and i converted the living room into a bedroom but due to the size of the cottage it didnt work out.

RE the CC, i'm afraid these are all mine...i'm thinking of maybe paying off the cahoot one (£117) and then just transfering x amount from another card everytime i've cleared it so that the amounts gradually drop but im still concentrating on a managable amount I.E £500 what do you think?

Looking at cards with 1000's on them can be a bit daunting.....lol

Donna

johannamse

General advice is that you should not worry about the number of debts you have, just pay off the ones with the highest apr first. I disagree with this, when you are at the beginning of the debt road, it is a real boost to get reduce number of payments. If I were you I would try and get rid of these small debts first. GET ORGANISED - (slap on the wrist!!) - get all these debts in a spreadsheet, with apr details, and start plainng for the next few months. This will make you feel much better.

mountainofdebt

If you post your monthly APR (will be on your statement) we can work out the APR on your Virgin card.

The fact that they seem unwilling to tell you would be ring alarm bells for me.

I agree with Johnnamse, although wisdom tells you that yu should be tackling the debts with the highest APR first, give yourself a boost by paying the small debts off first. When you have paid these off, put the money that you were puting towards these debts towards another debt.

WSO

I'm no expert but I would use your Cahoot flexible loan to get rid of some of the higher APRs in the short term... thinking mainly of your Egg card (assuming it is the green one, if it was blue, ask them to see if your APR has dropped when it was converted to Egg Money).

If your original loan with Cahoot was £10,000+ then move your Egg balance over (only if APR is higher) - this will allow you to "get rid" of one payment immediately although you will still be paying the same overall... will save some interest tho... you can do the same with your Cahoot credit card, but the balance would make saving's negliable. Not sure about the rate on the Virgin card, but I'm sure you get the idea...

westernpromise

Trout69 wrote:

Unfortunately i live in a one bedroom cottage - tried to rent teh bedroom out to a friend, and i converted the living room into a bedroom but due to the size of the cottage it didnt work out.

RE the CC, i'm afraid these are all mine...i'm thinking of maybe paying off the cahoot one (£117) and then just transfering x amount from another card everytime i've cleared it so that the amounts gradually drop but im still concentrating on a managable amount I.E £500 what do you think?

Looking at cards with 1000's on them can be a bit daunting.....lol

Donna

Broadly, there are only 2 ways to get rid of debt.

1/ default on it and negotiate a settlement amount, which will damage your credit history for six years from when you make the last payment.
2/ pay it off.

If you do the latter, then you need to do 2 things. One is minimise what you have to pay within the terms of the existing card agreements. The other is to restructure your financial life to support doing this.

Minimising what you have to pay is partly doing what others have suggested: 'pay off the worst first', i.e. you focus on debt, rather than on cards, which are simply vehicles for debt, and chuck everything at the highest APR.

You have about £28,000 of debt there. You should also look at the APR you're paying on each piece of that £28k and also at what the credit limit is on each individual card. It may be that you have storecard debt at 30% APR and a standard card with unused credit on it at a lower interest rate. See if that's the case first, and if it is, start transferring balances so that you fill up the credit limits on the cheapest cards first. As and when you clear balances in this way, phone the cleared card up and tell them you're closing the account because the rate is so high. They may then offer you a lower rate to do a balance transfer back again. Several posters here have done this to good effect - I think it's what Martin calls the credit card shuffle.

Restructuring your financial life is the other bit. You can only pay debt off quicker by earning more or spending less. There are only so many things you spend money on, therefore there are only so many things you can save money on. Martin's book / spreadsheet list all of those and it sounds like you've made a good start.

Keep posting and let us know how you're doing. Incidentally, what are the prospects of getting this ex of yours to cough up their share of that debt? If you don't want to phone him/her about it, write instead. You may be able to work out from the statements who spent what; if so I would not hesitate to pursue a claim through the small claims court because otherwise this person is skipping out on their debts, leaving you to pay them and stuffing your life up after they are supposed to have got out of it.