What shall I do?

serendipity101

Hi, I am new to posting, this is my first!
Please can anyone offer some advice.
I have been fortunate to have come into some inheritance (not a close relative), just over £21K. I have an Abbey loan for £10k, that turned into £12k including the interest, I have contacted them and the final settlement amount is approx £8,500. Its seems that I have paid off a huge amount of the interest charge and am only just getting into the loan amount.The loan has been running for 1 year & 7 months.The Abbey add 58 days interest as a penalty on an early settlement figure.

I have outstanding credit card debt, over a number of cards totalling £9k. My credit rating is good, have not been refused credit in the past. I have done the balance transfer thing before and they are all at varying rates.

I have a savings account abroad and am able to attract at least 14.7% net interest. (the interest rate changes depending on how much is put into the account) 15.25% is offered for £10k or above.

My questions are: Should I pay off all of my debts and then bank the remaining cash into the high interst savings account?
OR
Should I put the whole lot into the savings account, earn the higher rate of interst and pay off the credit card debts quickly and
allow the loan to continue and pay it of monthly, as I have been doing?

Any advice will be welcome, as I am feeling that I can't see the wood for the trees.
Thanks....

standupguy

I think it is always better to pay off loans and credit cards where the interest you are paying on the money loaned is usually higher that the interest you can earn after tax on the same amount of money.

If it were me then I would pay off the loan and credit cards and stash the rest of the cash!

Rafter

No idea how you are earning that much interest on your overseas account without either taking a huge risk, or it being in a currency that is likely to lose value against the £ over time.

After tax, you seem to be earning more interest on savings than you are likely to be paying on your loan.

Credit cards, likely some are charging more than that after tax.

That is how you should prioritise....

If you are genuinely earning more interest (net of tax) you should save. Otherwise pay off your debts in descending APR order.

There is also a psychological thing about being 'debt free' which this £21k allows you. You can then save the money you are spending in interest and repayments to allow you to buy what you want in future, whether that is a larger house or earlier retirement!

R.

toejumper

The intrest in an overseas bank are high my sister has a bank account in turkey and the interest rates are higher. you get paid much more in winter and goes down a few % in the summer. she also owns property in turkey hence the reason for a bank account over there. they pay a hell of a lot more intrest than we get over here

serendipity101

Thank you all very much for your quick replies.
It is definatly good advice to reduce credit cards giving prority to highest APR, I will bear that in mind


Like toejumper's sister my account is with Garanti Bank in Turkey.
I know that there are certain risks in placing money abroad when exchange rates are involved, but the high interest rate on savings and recognising the seasonal variations and getting the timing right is also very important.
Dose anyone think it would be better to place into a euro account?
once again, thanks.

dannynixon

Pay off your debts first. You did not expect the money so it would be nice to be 'debt free' unexpectedly

jopwo_87

id go with debt free every time... you'll havea little left over and lots left every month to play with.. win win situation if you ask me!!

serendipity101

Just to update all who helped,
I have paid off all my credit card debt and the Abbey loan too!
Now have a small amount that has been put into a high interst savings account in Turkey.
Many thanks for all your replies, they were really appreciated.