What to pay off with a loan.. please help!

[Greenfingeredfun]

I've had a credit card for years and years now. The balance was originally £1000. I've got it down to £535. But almost every month I stick a tenner fuel in or so when I'm skint. I pay £30 a month off it but £13 of that is interest. So it's never really going down. I applied for 0% credit cards but been declined. Instead Ive taken out a loan over 2 years to pay it off which costs £49pm. At least this way it will actually get paid off as I can't keep spending with it. So what to do with the remaining £465? I've got a balance of £482 on littlewoods, which costs me £80 pm. It'd be nice not to pay that off each month but it's on 0% so not sure if I'd be daft to do that, but it'd give me breathing space. Or pay off my £300 overdraft but that's only £10pm and I could decrease that gradually. Or I could pay it off my £166pm car finance which would mean it'd be paid off in December instead or March..
I don't know what to do! As you can tell, I'm not very good with money.

[UrethaFranklin]

If you paid it off your overdraft could you guarantee that you would then get the OD facility cancelled and wouldn't use it again? If so, do that. AND CUT UP THE CREDIT CARD!!!

[Greenfingeredfun]

Thanks for taking the time to reply.. I will definitely cut up the credit card!!
Do you think the overdraft is the best thing to pay off?

[gininteacupsandleavesonthelawn]

Overdraft is costing you £120 a year to borrow £300 - that's a hefty interest rate. I'd pay that then cancel OD.

[frenchfancy]

No - pay it off the car finance.

[bobbinpop]

I would pay the overdraft. Staying in credit (not in the od) will change the way you see your finances as you can see 0 as the cut off point. I think it will be a positive fresh start. I did it and it worked! Budget now for Christmas :)

[gininteacupsandleavesonthelawn]

No point in paying car finance if the interest is fixed surely? And unlikely that it's higher that the 30odd% she's paying on OD

[WankersHacksandThieves]

I'd check there isn't a redemption fee to pay off the car finance before considering that. Why didn't you just take out a smaller loan?

[melibu84]

Pay off which ever one has the highest amount of interest.

[MountainDweller]

Is there interest on the car finance? If so pay that off!

[WankersHacksandThieves]

In general though the OD is probably the best home for the cash. If you pay off little woods you then have extra money each month to apply to your OD and then when your car is paid, you'd be more or less debt free. Apart from the loan of course...

[memyselfandaye]

I would pay off the overdraft then use what's left to pay Littlewoods.

[WankersHacksandThieves]

Okay, I've done a few sums.

You have 6 months left on both your car and littlewoods. If you do nothing in terms of paying them off, they will both be paid off in March and you'll have £246 extra in your pocket each month from April onwards.

You are currently paying off your CC at £30 and another £10 towards the overdraft. If the loan is £49 then you are £9 per month down in terms of actual payments out, but if you are paying for your overdraft, there is probably a monthly fee plus interest for being overdrawn - if that comes to more than £9 per month then you are better off already if you use the money for the overdraft as well as not throwing money away on interest with the CC.

Littlewoods is 0% because you've already paid a premium to buy from them in the first place.

Car loan is fixed interest, you may need to pay a redemption fee too so as tempting as it is to have that paid quicker, I'd leave it to run to term and look forward to April.

What you need to do now is stop spending and be careful over Christmas.

Come April you have that extra, the £246 plus the £10 you were paying towards your overdraft and anything you were spending on interest on the overdraft. I suggest you use some of that to buy things you need when you need them rather than using the Littlewoods and put the majority of it away in savings so that you have money for emergencies such as car repairs etc. and also cash for treats when you need them. :)

All you need to do is get through the next 6 months.

[WankersHacksandThieves]

After paying off the overdraft, can you pay any residue back to the loan you've just taken out? That might reduce the term/monthly payment on that too?

[WankersHacksandThieves]

or if your car loan allows, that would be enough for one month's payment and be finished a month early.

[Leviticus]

You need to pay something off that frees up some money for you.

You say that while currently paying £30 per month you are skint every month. You're now committed to paying £49. I'd be concerned that unless you get rid of another bill you'll end up putting petrol on your cc again.

[tribpot]

What I would do is keep the extra to one side as a buffer. What's happened to you is what happens to lots of people, you gradually slide into debt and then to pay one off you take on another debt, and it gently spirals until you are living right at the margins. I'm guessing you have nothing put aside for car repairs, Christmas, or regular non-monthly expenses like insurance renewal? I'm guessing as soon as one of these hits you will have no choice but to turn to the debt again to get by.

So - I would work out exactly what you need to spend, including something put by for emergencies and unexpected spending in the next six months. I bet once you've done that the apparently excess money in the loan will have been spent several times over.

Now the trick is not to turn to more debt. Have a completely frugal Christmas. Close all of these accounts - I assume the credit card account is already closed? Can you phone Littlewoods to tell them to freeze your account so you can't use it for any more spending?

[Greenfingeredfun]

Thank you all so much. I'm blown away by how many of you have responded.
The loan should be in my account tomorrow so will pay the cc off immediately and close the account.
I definitely need to free up some money, so I need to use the remainder of the loan as wisely as possible.
Littlewoods is due next week so if I pay that account it saves me having to find the money for it..maybe I could then ring my bank each month on payday and reduce it £50 at a time. Do banks let you do that gradually over time?
I've upped my hours at work which will bring in an extra £200 a month which all helps. I'm on a complete drive to organise my finances and begin living a less stressful life! Fed up of having to say 'no' to everything because we can't afford it.

[tribpot]

I can see you're taking some great steps to try and improve your financial position, the extra hours is a great start, as long as that money is thrown straight at debt (or put aside for an emergency buffer to stop the debt spiralling) but the comment Littlewoods is due next week so if I pay that account it saves me having to find the money for it.. worries me as it suggests you're still just reacting to each debt as it becomes due for payment and looking for the money at that point. The money for this month's Littlewoods debt should really be already earmarked and waiting to go, if you're truly in a position to decide where this additional money should be allocated.

So I wouldn't do anything with it until your financial picture is clearer, then you can make a positive decision about where to put it. If you haven't already done one, I would do a Statement of Affairs or access the Debt Free Wannabe board at MSE to get a real handle on your debts and income situation.

I would definitely give your bank a call and see if you can request the overdraft limit is reduced each month, I think they should be supportive.

[Mum4Fergus]

Depends on your Bank...I can only repay mine in full if using online so just call them every payday and go through the process to have it reduced.

[Greenfingeredfun]

I can't see an option to do it online either mum4fergus. I guess I'll have to do it over the phone too.
I've paid off barclaycard (and cut up the card/cancelled the account).
Paid £200 off Littlewoods.
Transferred the remaining £300 into my online savings until I know what to do with it I may well need it before payday, if not then I can use it in Nov to clear the Littlewoods. Seems daft to pay it all off now then struggle to pay for a good shop the last week of the month. Will be very, very careful though and try not to dip in to it.

[Greenfingeredfun]

Food shop not good shop! I'd bloody love a good shop!

[Greenfingeredfun]

Thanks for the supportive kick up the butt tribpot. You're quite right! I have everything else set to go out on payday so it's just gone immediately. Littlewoods is due on a different date each month. Mind you, I could still just pay it in advance when I'm paid! Head in sand situation, am going to look at my incomings/outgoings so I can see exactly where I'm at.

[Desmondo2016]

well done on trying to take control but im really concerned/confused that you may need to use the remaining loan funds for a food shop? Have I misunderstood?

[Greenfingeredfun]

The last week of the month is so tight for me, sometimes I use the overdraft/cc's for food/petrol. I know, not good
The good news is when I paid off my credit card they took off £50 off interest as a goodwill gesture so I paid £485 instead of the £535 I was expecting.

[Greenfingeredfun]

My food shops are only £50-£55 for a family of four too!