Using HTB ISA to pay off debts

FinallyLiberated · 9 April 2018 at 8:07PM

Hi all,

I understand that it's usually good practice to clear your debts, before you start saving. But i'm coming here to ask for advice and opinions regarding whether or not it's a good idea to pay off my credit card balance with savings from a help to buy ISA.

My current debts are:
£200 - Credit card
£600 - Loan from sister
£1,500 - Interest and fee free Overdraft

But I currently have about £4,400 on my HTB. I have maxed it out by standing order every month since opening the account in December 2017.

I know I can use 0% interest credit cards etc but i'm honestly not interested in opening another account / obtaining another credit card and just eager to get out of debt as soon as possible as this will give me some peace of mind. I have agreed to pay back my sister in full at the end of this month.

My after tax income is around £1,750, but I need about £950 for rent and bills. I'll also set aside £100 for things like groceries and transport etc.

This brings me back to my main question, should I withdraw £200-£400 from my ISA to pay off my credit card and the loan from my sister. This will mean that I don't put any cash into the ISA this month.

Alternatively, I could leave the ISA alone, don't put anything in this month but will have to wait till May payday to finally clear off the credit card.

Are there any other options I haven't thought about?

Dobbibill · 9 April 2018 at 9:39PM

Why don't you swap your payments around.

Put your CC payment into your ISA this month and pay the CC off in full with your £200 ISA payment. That way you are not missing a month on the ISA but still paying off your debt.

Are you giving your sister anything each month at the moment?

wjr4 · 10 April 2018 at 12:24PM

You're left with around £700 after bills, transport etc so I wouldn't recommend withdrawing from your ISA. I'd concentrate on repaying your sister if she needs the money urgently. If not, repay the credit card and close it ASAP, then repay your sister, then concentrate on the overdraft. You'll be debt-free and also have more in your ISA when you want to buy a property - good luck!

bytheseas · 10 April 2018 at 1:29PM

Don't withdraw from the ISA. You can only do that one big payment once you setup the account. If you eat into that you're then limited by the monthly payments only to get the figure up.

You can also only ever have 1 help to buy ISA so you can't withdraw that and think oh I can setup another and do the big deposit again.

Sharon87 · 11 April 2018 at 10:53PM

You can withdraw from a HTB ISA if you need it. But don't forget you'll get a 25% bonus from your savings when you use it for a house purchase. So using it to pay off your small amounts of debt doesn't make sense. Just have some frugal months and pay them off over the next few months. You'll get more money eventually.

Using HTB ISA to pay off debts

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