What order would you pay this debt off?

Geworgie · 16 April 2018 at 4:45PM

Hello all,
I'm looking for some fresh eyes on our debt. I've got a couple of spreadsheets that I've been keeping and forecasting with and I think I'm going round in circles at this point.

For background we have significant debt (although it's not unmanageable due to reasonably high income) because life got complicated for awhile. We are no longer adding to the debt but we are now down to one income whilst I am on maternity leave until October.

We have:
CC1: 5500 - 1.6% interest
CC2: 8500 - 1.5% interest
CC3: 7500 - 0% until Dec 18 - 8100 limit
CC4: 3400 - 0% until April 20 - 3400 limit
CC5: 2400 - 0% until Dec 20 - 3800 limit
Car loan: 10k

We are currently paying the minimum balances on all the ccs (we were paying at least £30 over the minimum but reduced the payments to give us some breathing room whilst on mat leave.)

We currently have around £1000 set aside so have been toying with paying down CC5 to 1400 and then transfering 2400 from CC2.

Is this the best option?

There should also be a bonus of around 10k later in the year if that makes a difference, although this isn't guanteed.

Since I'm not currently working my eligibility for any credit is practically zero so should we try to pay off the debt that is in my husband's name first to improve his credit rating and therefore give us the freedom to perhaps apply for a 0% card later in the year to do a balance transfer

I'm trying myself in knots!!!

Any help much appreciated!

theoretica · 16 April 2018 at 5:04PM

When you transfer to a cc don't you pay a fee? So what is the advantage to pay off the cc at 0% and then transfer to it, rather than paying the money off the interest paying card directly?

Geworgie · 16 April 2018 at 5:36PM

Thanks for your reply.

Yes, I would pay a fee but it would be a maximum of £190 which I would easily rack up in interest. Cc1 currently costs me £100p/m in interest so I figured its a coat worth paying.

Happy to be corrected though!:)

Fireflyaway · 16 April 2018 at 6:03PM

If I were in your situation, I do the snowball method. Pay minimum on everything but the smallest and pay that off. Then move to the next one and so on. It's more motivational and you feel like you are making progress quicker.
Have you done a written budget to see where you can make savings? You might be able to decrease your outgoings and pay it even quicker.
I'd probably focus on the ccs and leave the car till last, seeing that more as a bill. I'd also close the cards so as not to be tempted and find the hard work was for nothing.

theoretica · 16 April 2018 at 6:20PM

Geworgie wrote: »

Thanks for your reply.

Yes, I would pay a fee but it would be a maximum of £190 which I would easily rack up in interest. Cc1 currently costs me £100p/m in interest so I figured its a coat worth paying.

Happy to be corrected though!:)

Uhuh, but rather than pay £1000 off the interest free card and then a fee to transfer £2400, would you have a smaller fee if you paid the £1000 direct off the interest charging card and only transferred £1400?

LMG1305 · 17 April 2018 at 2:29PM

It would make more sense to use the £1000 to reduce the balance on CC1 & then just transfer over what you can to one of the 0% balance transfer deals.

indesisiv · 19 April 2018 at 12:16PM

Pay minimums on all apart from CC1.
The 10k that you will *hopefully* get later in the year you will then need to clear CC3 (Before the 0% runs out) and use the rest of it for CC1.

Geworgie wrote: »

Yes, I would pay a fee but it would be a maximum of £190 which I would easily rack up in interest. Cc1 currently costs me £100p/m in interest so I figured its a coat worth paying.

Happy to be corrected though!:)

You are missing the point here you are paying 0% debt off to replace it with 0% debt but with an additional fee. If you use that £1k to pay directly CC1 you have done exactly the same as you were thinking expect you don't have to pay the £190 fee. i.e net result is CC1 is reduced by 1k.

Dobbibill · 19 April 2018 at 10:04PM

In your shoes I would pay £1000 of CC1 - then also transfer £1000 from CC1 to CC5.

This will leave £3500 on CC1 - the interest will reduce as will the monthly payments but keep paying the same as you were, so you are paying over the minimum. Throw every penny at this first.

redpete · 19 April 2018 at 10:10PM

Fireflyaway wrote: »

If I were in your situation, I do the snowball method. Pay minimum on everything but the smallest and pay that off.

Or pay minimum on everything but the one with highest interest rate and pay that off, then you are saving yourself the most amount of money.

enthusiasticsaver · 19 April 2018 at 11:19PM

Tackle the most expensive first so CC1. I agree it is better to use the £1000 to pay it down then transfer to 0% card if possible.

enjoyyourshoes · 20 April 2018 at 8:03AM

What is the interest on the car loan?

Are CC1 & 2 interest rates monthly? or are they an annual promotional rate? If latter when does that expire?

What are the rates post promotional rate for the CC3,4,5 & if promo for CC1&2?

How much can you afford to pay off your debts on a monthly basis, have you changed your monthly spending and reduced all monthly costs.?

Have yo solved the real problem, which is why did yo get int tis position in the first place?

What order would you pay this debt off?

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