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follow common sense and end up paying less interest......or increase amount available to pay off accounts with interest?

(7 Posts)
alwayslookingforanswers Thu 22-Oct-09 11:45:06

That's my dilemma.

Thanks to mananaging to scrap through last month without the JSA, and ESA backdating us we actually have some "spare" cash this month - quite a bit actually £250 to be precise.

I have 2 choice (in my mind) of what to do with this money.

1. divide by 2 and pay off extra on high interest credit accounts, this will result in lowering the minimum payments (we're actually paying a bit more than the monthly payments each month on them) and the amount of interest paid.

2. We've got quite a lot of "small" (3 figure no interest) debts that we're paying off in little chunks (£10/£20 a month) each month. If I make some massive indents into those then they'll be paid off sooner and we'll have extra money every month to pay off the interest accounts.

Common sense is telling me to reduce the interest ones now, and just keep chipping away at the smaller ones. But on the other hand it would be a real moral booster to cross some of those smaller debts off the list of debts sooner rather than later and have more money to either put towards the interest ones, or to be there if we need it for other stuff....

So which shall I do? At the current payment levels some of the interest debts are going to be cleared quicker than the smaller ones because they've got more each month going towards them.....

wilbur Thu 22-Oct-09 11:49:52

High interest card accounts first, always. I understand the boost to your morale of paying off an entire debt, but if it is interest free, that should be the last thing you pay off. I'm sure if you do the sums interms of projected interest on the debts from your cards, you will save a great deal more by putting the £250 towards them now. Welldone by the way, for sorting out debt and not blowing the £250 on Xmas!

alwayslookingforanswers Thu 22-Oct-09 11:53:18

it's just the thought of this list of debts (there's 16 of them in total - 4 have interest on them) hanging around for 5 or 6yrs sad.

Plus the thought of having an extra £50-60 every single month to pay off the interest ones even quicker (2 will be done in 25 months if I snowball "correctly", 1 will take 32 months and not sure about the other as it's the mortgage arrears which are obviously adding extra to the interest amount).

alwayslookingforanswers Thu 22-Oct-09 11:58:21

you know the things bugging me about those interest debts.

One of the ones with the highest interest rate, and a higher balance to pay off, I'll end up paying less interest on than the lowest interest one with a lower balance because of the minimum payments and the extra I'm putting on.

It just feels wrong that I've been paying a set amount each month to them both off , and have cleared £200 on the highest interet one and only £90 on the lowest interest one.

Other thing is paying off debts for things we don't even have anymore, the car, for instance, DH hasn't had that car for nearly 2yrs now and we're still paying off £20 a month towards the remainder.

Shall be good though and put a bit more on the higher interest ones (already paid extra on them this month)

Mousey84 Thu 22-Oct-09 12:17:12

Wow, thats some determination to get that amount together! Well done.

Im sure you have already considered it, but any chance you can consolidate them all onto a 0% credit card or bank account with 0% overdraft? Or even all into one with lower interest - can you transfer the interest accumulating loans to the non-interest ones?

Mousey84 Thu 22-Oct-09 12:18:09

Also, are the interest rates on the 4 accounts fixed? Or are they subject to change?

alwayslookingforanswers Thu 22-Oct-09 13:27:45

Mousey - they're all subject to change mortgage has just gone down, and 2 of the other credit accounts have gone up in the last few months.

Got that amount together as I was a tight fisted cow in September due to not getting the JSA through, and now they've backdated the ESA to when the JSA stopped we've got the money from last month to spend this month.

DH certainly wouldn't get a 0% credit card/overdraft (most oft he debts in his name and his credit rating is seriously f*cked atm).

I doubt I'd get one either as I already have 2 credit cards in my name, and we're on benefits. And if I did get one it would probably then turn into a stupid interest rate one at the end of the 0% (like my Capital One).

Unfortunately most of the debts are utilities type bills so can't transfer anything onto them.

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