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  • FIRST POST
    • AnxiousTheElephant
    • By AnxiousTheElephant 12th Nov 19, 11:49 PM
    • 46Posts
    • 21Thanks
    AnxiousTheElephant
    Savings Vs debt
    • #1
    • 12th Nov 19, 11:49 PM
    Savings Vs debt 12th Nov 19 at 11:49 PM
    My debts are nearly paid (after spending most of the last 10years in and out of debt)

    Currently have 2 debts
    Nationwide (default jan2018) 1700 just started new payment plan of 35.50 per week
    118 money 1540. Currently paying 7.21 a month

    Both are frozen so no interest is being added.

    I currently have around 2000 in a lifetime ISA (want to make it 4000 before next tax year) and around 1000 EF in a savings account.

    Should I use savings to pay off debt? Should I stop saving until I have paid off debts? Currently have around 600+ a month disposable income and am paid weekly. Sometimes more depending on overtime.

    Sorry if this was a bit rambly

    TIA
Page 1
    • Suseka97
    • By Suseka97 13th Nov 19, 8:10 AM
    • 872 Posts
    • 960 Thanks
    Suseka97
    • #2
    • 13th Nov 19, 8:10 AM
    • #2
    • 13th Nov 19, 8:10 AM
    There will of course be other views.. but seeing as your debts are defaulted, you are not being charged interest and have been paying via some sort of repayment plan - there's nothing really to be gained from paying them off any earlier unless you are aiming to make some full and final offers.

    If it were me I'd chance some F&Fs and see where that gets me and if they don't bite - then just carry on as you are and put your money into your savings plan.

    You should have a read of the full and final settlement thread and do a little research first. People do tend to get better offers when debts have been sold off to a DCA, whereas it appears yours are still with the original creditor - but you never know.

    Good luck.
    • enthusiasticsaver
    • By enthusiasticsaver 13th Nov 19, 6:01 PM
    • 9,586 Posts
    • 22,270 Thanks
    enthusiasticsaver
    • #3
    • 13th Nov 19, 6:01 PM
    • #3
    • 13th Nov 19, 6:01 PM
    I think I would continue to save as you have no interest being added and a payment plan agreed. Is that subject to review at any time? On that 118 loan at that payment rate it will take more than 17 years to pay it off which is ridiculous having that over your head for that long. The Nationwide is not too bad as it will be paid off within the next year. Your credit rating will be affected for another 6 years anyway so no point in going for a mortgage within that period (unless it is retention deal) so I would apply for a F and F on the 118 loan in the next few years.
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • Andyjflet
    • By Andyjflet 14th Nov 19, 8:26 AM
    • 156 Posts
    • 136 Thanks
    Andyjflet
    • #4
    • 14th Nov 19, 8:26 AM
    • #4
    • 14th Nov 19, 8:26 AM
    I would keep 1000 as an emergency fund and pay off the debt using the rest. Then none of your money is being used to pay other people for borrowing their money, and you can start to build wealth and save with the payments saved.
    Baby Step 1 - 0 saved for emergency fund
    M&S Loan 14708 inc interest full term
    Santander 0% CC 1283
    Sainsburys 0% CC 2612
    Hitachi Loan 0% 216 ends March 2020
    • Sanctioned Parts List
    • By Sanctioned Parts List 14th Nov 19, 12:07 PM
    • 449 Posts
    • 1,138 Thanks
    Sanctioned Parts List
    • #5
    • 14th Nov 19, 12:07 PM
    • #5
    • 14th Nov 19, 12:07 PM
    35.50 per week, as in 153.83/month, is that correct?

    On that basis, your Nationwide debt would be gone in a little over 9 months. If you then repurposed that to accelerating the payments on your 118 debt, that would be cleared a little over 9 months after that. You're 18 months off being free of these two debts without having to scrape up extra cash.

    Whereas the LISA's making you money, especially with the government bung - leave that be and you'll be richer after 2 years than if you liquidate it, pay off your debts and started saving today.

    • Silver Queen
    • By Silver Queen 14th Nov 19, 1:02 PM
    • 743 Posts
    • 3,257 Thanks
    Silver Queen
    • #6
    • 14th Nov 19, 1:02 PM
    • #6
    • 14th Nov 19, 1:02 PM
    If you take money out of your LISA for anything other than buying a house or retiring, you will incur a 25% penalty. I'd avoid taking it out if possible.

    I'd stop saving for now and concentrate on paying off the debt. Once paid off, ramp up your saving to make up for it.
    Debt Totals July 2019::
    350 Natwest Credit Card / ]Now 0 (paid off and closed 04/2017) 15,500 postgrad loan from parents/ Now 7,000 5,000 sister loan/ Now 0500 train ticket loan from parents / Now 0 (paid off 16/02/18)2,000 Overdraft Now 0 (paid off 09/03/18) 1,967.83 Barclays 0% card Now 0
    Total 7,000
    • EssexHebridean
    • By EssexHebridean 14th Nov 19, 1:33 PM
    • 9,772 Posts
    • 49,736 Thanks
    EssexHebridean
    • #7
    • 14th Nov 19, 1:33 PM
    • #7
    • 14th Nov 19, 1:33 PM
    Allowing that everything has interest frozen then there is no real need to pay off ahead of the payment schedule already set if you didn't ant to, however if it were me I'd probably want to work on getting free of the debt sooner rather than later.

    You're right to keep your EF accessible and away from the LISA (for the reasons that SQ has mentioned above) also I also agree with her that taking money out of the LISA would be counterproductive.

    One option you could consider would be to save money (in a different account to the LISA, maybe a regular saver account if your bank has one?) ready to make F&F offers on the debts when you have a reasonable pot saved? Particularly 118 you're paying a quite small amount to, so they might be open to offers a little way down the line.
    MORTGAGE FREE 30/09/2016
    SOA CALCULATOR (for DFW newbies): SOA Calculator
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