Best way of paying off debt

rowan_gibson

Hi I'm new to the forum so please be kind.

After years of building up debt irresponsibly, I decided last year to tackle the problem!

I have two large loans, but no other outstanding debt, i currently owe around £15k to barclays, paying back £210/month. and £6.8k to A&L paying £200/month.

The A&L loan had all its interest added at the start, so i know exactly when i am due to pay it off, and (fingers cross) come February i should receive a bonus form work allowing me to pay it all off in full.

When i have paid off the A&L debt i would like to increase my payments to Barclays and pay off the other debt quicker. the problem i face is not knowing when the term of the loan runs to. I have been paying for a year (£2420) but only cleared around £1100 form the loan...... i also believe if i repay early i will get charged

My question is: Do i move the barclay debt to a new loan, do i increase payments to the loan, or is there a better way (e.g. putting £200/month into an ISA to off set the loan interest).

I have managed to save over £1500 this year on top of repaying debt, but this is earmarked for a wedding, so i may be able to pay more than the £200/month.

Any advice is greatly recieved.

Thanks

Ro

madmalteaser

Hi there,

I'm no expert but I think you're best bet would be to get in touch with Barclays to find out a) what the term of your loan is, b) what your APR is and c) whether you can increase payments and hopefully pay it off early or not.

I too have a Barclays loan (consolidation one which I know is generally frowned upon but was actually the best option for me). I have been told that should I come into some funds and choose to pay it off early then this is entirely possible.

See what they say regarding your second loan too. They may be able to offer you a better situation - ie combining the loans into one with a lower monthly payment but obviously the term of this loan might be increased etc. I always find that when you're not sure it's best to ask otherwise you will wonder about it constantly!

LEWKI

Hi - I am no expert on this, but I can sympathise with the interest payments on the loan.
My Natwest loan was flexible so I could overpay with no penalties. My solutions was to take a 0% cc, and transferred all my debt to this. Not sure what your redemption fee would be - but you could do the maths and see if you are better off.
By doing this and making the minimum payment on your CC at 0%, you will clear the other loan faster
Like I said - I am not an expert but the maths worked for me
Good luck

GeorgeUK

Hi Rowan

When paying off a loan early, there is often and early settlement fee, so may be worth asking barclays what the current early settlement figure is - just to get a rough figure if you do decide to pay it off early.

I would not bother with the ISA idea. If your loan APR is less that the ISA then by all means save the money but i doubt your loan will be charging such a small interest rate.

I'm guessing you are paying PPI on the loan which is why you have only paid off £1100. Not too sure what you can do to get rid of it as different companies deal with it in different ways. Was the PPI missold?

rowan_gibson

Thanks for the advice, i'm not looking to extend the terms if anything i'd like to be debt free asap. I was wondering the best way of paying off circa £15k given that i owuld be able to afford approx £400/month repayments (what i'm paying now.) Obviously the less i pay in interest and charges the better.

Thanks