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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

Using this money to pay off debts?

38 replies

Idessa · 01/11/2021 17:20

I have around 10k in debt. I'm soon to gain 17k from a house sale which would be a nice deposit towards a house, however I can't get a mortgage for another couple of years until my son is no longer in childcare. Would I be daft to use 10k to pay off my debts, have 7k left which would pay for a holiday for me and my son (much needed), put a small amount in his savings then have around 5k left as a buffer? It may mean I will never be able to save for a mortgage deposit however I would be debt free. Would I be daft to do this? Or should being debt free be my number 1 priority? I'm very good with money. My debt is car finance and a loan to pay for court costs which was non negotiable as I needed to protect my son. Didn't take out more than I could afford and don't struggle to pay it off. The interest is SO high though... thoughts?

OP posts:
Original poster
Idessa · 01/11/2021 17:24

I'm not going to lie, high rents and my dire inability to get a mortgage is disheartening to say the least...

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HazelandChacha · 01/11/2021 17:24

I think Martin Lewis advises to pay off debts. Those are costing you more money than you would be earning in interest on the cash. The money that was earmarked for monthly payments you need to put in a separate savings account instead to build your savings back up.

BlueBloodedBlue · 01/11/2021 17:26

I would always pay off debt first.
Could you do that and then put the repayments you are currently paying into a savings account? (Assuming you can afford them now). That way you'll be slowly building up a nest egg to use as a deposit when you're in a position to buy.

MissConductUS · 01/11/2021 17:26

What interest rate are you paying on the debts?

BlueBloodedBlue · 01/11/2021 17:26

Snap @HazelandChacha Grin

Original poster
Idessa · 01/11/2021 17:27

@BlueBloodedBlue

I would always pay off debt first. Could you do that and then put the repayments you are currently paying into a savings account? (Assuming you can afford them now). That way you'll be slowly building up a nest egg to use as a deposit when you're in a position to buy.
Yep apart from anything over 6k in universal credit my universal credit goes down and I eat in to my savings. I've checked with citizens advice and paying off debts is acceptable and won't be deprivation of assets. It just means it's pointless saving until I'm off universal credit..
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CastleCrasher · 01/11/2021 17:29

Definitely pay the debt given the interest rate and then use the money you would have put to the debts to rebuild your savings

TheLastSpookyBakedBeanSaysBoo · 01/11/2021 17:29

I would pay off the debts because otherwise you are paying off interest which is 'empty' spending. Once you've done that I would start regularly saving the amount you previously were paying off on the debt into a saving account. Then you will be saving and accruing interest on those savings, not spending money on the debt interest. There will be no 'empty' spending. Whatever's left, by all means use for a holiday or buffer or keep in savings whatever you want to do with it. But paying interest on debts when you don't have to is nuts, no offence

Original poster
Idessa · 01/11/2021 17:30

@TheLastSpookyBakedBeanSaysBoo

I would pay off the debts because otherwise you are paying off interest which is 'empty' spending. Once you've done that I would start regularly saving the amount you previously were paying off on the debt into a saving account. Then you will be saving and accruing interest on those savings, not spending money on the debt interest. There will be no 'empty' spending. Whatever's left, by all means use for a holiday or buffer or keep in savings whatever you want to do with it. But paying interest on debts when you don't have to is nuts, no offence
No offence taken at all. I only did it because I had to!
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mrsbitaly · 01/11/2021 17:30

I can't tell you what a relief it was for me to be debt free. I was in the same position as you and although I paid the bare minimum for debts the weight was just awful. I've been debt free for over a year, and have more money each month to be able to do nice things with my kids. I'm not living to the penny or my next pay anymore. It actually made me become more responsible and cautious and I never take any form of credit anymore. I think your plan sounds great.

Viviennemary · 01/11/2021 17:30

I think a £7K splurge on a holiday would be a very foolish move indeed. I think I would pay say 5k off from the debts as a starter. And then assess the situation in a few months. Dont give up your dream of buying a house

Original poster
Idessa · 01/11/2021 17:31

@Viviennemary

I think a £7K splurge on a holiday would be a very foolish move indeed. I think I would pay say 5k off from the debts as a starter. And then assess the situation in a few months. Dont give up your dream of buying a house
7k splurge on a holiday! I was thinking more like £500!
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REP22 · 01/11/2021 17:31

In a sense, paying off your debts is investing in your future, as it would put a stop to increasing interest. Your plans seem very wise to me.

I've been through an IVA and a DMP in the past, so am possibly biased, but based on previous wretched experience, paying off the debts and removing their burden from your mind would be my own preferred option.

Good luck and best wishes to you, whatever you decide to do, and hope all goes well with the house sale. x

Viviennemary · 01/11/2021 17:34

Sorry I misread it. I thought you said 7k on a holiday. 500 is fine.Grin and in view of the UC situation I wouldnt keep savings above tthe 6k allowed.

Nearlytheretrees · 01/11/2021 17:34

I would pay the debt then each month put some in sons savings account to build him some for the future if you cannot save for yourself due to uc

Original poster
Idessa · 01/11/2021 17:35

@Viviennemary

Sorry I misread it. I thought you said 7k on a holiday. 500 is fine.Grin and in view of the UC situation I wouldnt keep savings above tthe 6k allowed.
Haha. Imagining a 7k holiday now. Wouldn't that be the life....
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CiderJolly · 01/11/2021 17:38

Pay off the debts 100%
A little holiday and some savings sounds very sensible too.

WickedWitchOfTheTrent · 01/11/2021 17:40

Pay off the debt and put the money you were paying towards your debt into a savings account. That way you're not paying any interest and actually saving money.

kweeble · 01/11/2021 17:46

I agree you’ll will save you’d be better longer term to pay off your debts now.
£7000 is so much for a holiday - are you sure you can’t have a good one for less?
I hope you can get into the habit of saving so you can buy again at some point.

LakieLady · 01/11/2021 17:47

Pay off the debt and save the equivalent of the debt repayments each month.

And definitely treat yourself to a holiday!

coogee · 01/11/2021 17:54

£7000 is so much for a holiday - are you sure you can’t have a good one for less?

It’s not £7000 for a holiday. The OP said…

have 7k left which would pay for a holiday for me and my son (much needed), put a small amount in his savings then have around 5k left as a buffer?

Original poster
Idessa · 01/11/2021 18:22

@kweeble

I agree you’ll will save you’d be better longer term to pay off your debts now. £7000 is so much for a holiday - are you sure you can’t have a good one for less? I hope you can get into the habit of saving so you can buy again at some point.
It's how I was able to buy with my ex in the first place. As I said, I'm good with money. Circumstances forced me to get a loan to protect my son. Best money I ever spent.
OP posts:
Original poster
Idessa · 01/11/2021 18:22

Loving this 7k holiday idea Grin

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Sciurus83 · 01/11/2021 20:34

Ahh yeh I think the mental freedom of paying off debts shouldn't be underestimated, especially as it was something that was stressful and you had to do to protect your son. Be good to properly put that in the past. Then get on your £7k holiday to the Maldives WinkGrin

Hankunamatata · 01/11/2021 20:41

Yep pay off debts. Have a holiday and save the rest. Never know where you might be in a couple of years and be able to afford a house.