How to best pay down this debt

[Hdkatznahtw125sgh]

hi,

Excluding my mortgage I have the following debts that I’m trying to get on top of. Everything is frozen or repayment only so I can’t add to the debt:
£600 on store cards @ 29.9%. 11 months left on instalment plans.
£3350 on credit card, 0% til September 2025.
£3300 on ikea 0% finance, 30 months left.

I have 1.5k in a savings account I can’t withdraw from for 12 months and £500 in another one.

I earn ~2.5k take home, approx £800 leftover if I stop impulse spending each month to put towards debt/savings. A promotion wouldn’t result in significant pay increase for two years (NHS banding)

I’ve been slightly overpaying all the accounts and my mortgage which I now realise wasn’t the best idea.

My mortgage has just under 4 years before renewal and I’d like to pay this debt off as quickly as possible, save up to get my bathroom done, then overpay my mortgage but I feel quite overwhelmed at the prospect.

im currently paying £480 on this debt( half of my bills), which includes overpayments, minimum would be £325.

I’d like to keep my savings for emergencies

Manageable. Well done for recognising and freezing it.

I'd work on that £600 in the first instance as it's going to cause the biggest headache with the interest rate.

Are you able to buy and flip anything? Do you have an area of interest you could utilise? I buy and flip vintage toys. Make about £50 a week.

Or maybe extra work doing something on your day off.

That £600 isn't insurmountable and you'd feel so much better when it's cleared.

Focus on one debt at a time.

You could take a look at the snowball method - basically it's where you pay the minimum on everything but then pay as much as you can on top to pay off the smallest debt. When that's paid off you then throw all the extra at the next smallest debt, and so on. Dave Ramsey has some videos about it on YouTube.

Pay off the one you’re paying interest on first unless there are early payment penalty clauses.

Well done looking at your debts and trying to pay it all off.

Personally I would stop overpaying the mortgage, unless your overpayments are going to make a difference to your LTV bracket when you renew.

It makes no sense to overpay the 0% debt, so attack the store card. Pay the minimum on everything except the store card and pay the extra £155 off the store card as well. If you can put anything extra aside from your £800 spending money/diverted mortgage overpayments, throw this at the store card too. When this has gone, put the £155 plus store card minimum against the credit card until that has gone. Repeat for the IKEA loan. Snowball style.

Only caveat would be that if you might borrow for your bathroom, save the overpayments for that in case you can't get 0%.

Personally I would throw the savings at the debt as soon as you can access and keep a credit card account open for the emeergencies. Your savings are of little use in an emergency as they are inaccessible.

Try to put any little bits and bobs that come in against the debts (ie if you sell anything, get a bonus, cashback, survey money etc. etc.). Make it a project or campaign and you will be debt free and mortgage free in no time!

I'd definitely throw as much at the store card debt as possible. You'll soon get it cleared.

Then I'd probably focus on the one that has the longer term so that the two 0% debts possibly get cleared before 2025.

I wouldn't be overpaying the mortgage at this stage. I'd concentrate on the cards.

Agree with all of the advice you've received already. If you're NHS are you able to do Bank Holidays and nights/weekends for extra pay? Are you able to volunteer for extra shifts?

Put as much as you can to the store card. Stop overpaying anything else until this is paid off.

Once that’s done, open the highest interest savings account you can and start putting the amount you were paying on the store card and the overpayments into that.

Ideally you need a minimum payment of £335 less the minimum payments on the credit card and IKEA finance to be going into this account.

If you maintain that and don’t touch the savings account, when the interest free term ends you will have enough in the savings account to settle it.

If you can be disciplined enough, it’s silly to overpay interest free debt when there are decent savings rates to be had at the moment. My savings interest rate is even higher than my mortgage which I fixed last year so I’m saving instead of repaying the mortgage, I’ll just use it as a lump sum to pay down my mortgage at my next remortgage date. I can switch this strategy if I start to earn less interest but it will make me the most money overall.

Reduce your outgoings as much as you can.
Increase your incomings if you can although this is often harder
Make the minimum payments on all debts.
Do not overpay your mortgage at this point unless there's a very specific reason to be doing this such as entering a meaningfully different LTV bracket that will save you a lot in interest when you remortgage.

Then...
Throw absolutely every penny leftover that does not have to be spent on the bare essentials plus all minimum payments at your scorecard debt. You should be able to clear this in a 2-3 months, no?

Then take the money you were throwing at that move onto the credit card debt. Attack that with vigour. Once that's paid, move onto the IKEA debt.

Then... you'll be sorted!
This method gives you a great emotional boost as you'll see the number of debts shrink over time vs just overpaying a bit on all of them.

The advice above to put money aside, in high interest rate accounts, towards your 0% debts, then use that money plus interest earned to pay them off when the 0% rate is about to run out, is rationally spot on. BUT there is a real risk you might not have the self-discipline needed not to dip into those savings. Know thyself - if there's even a slender chance that might be the case, I don't think the small amount of interest you'd earn would be worth the risk. For example, £500 in a savings account at 5% APR is only going to earn you £1.37 a month: not worth it if you don't have the willpower to stick to the plan; you'd be better off just paying it directly against the debt each month.

Pay off the store cards immediately using savings/no impulse spending for a few weeks. It makes no sense to carry that sort of debt. If you have an emergency you can deal with it from your existing earnings, you have the money if you don't buy any non essentials.

You say it's all 'frozen or repayment only' does that mean you're on a debt management plan? If so, you want to clear the money as fast as you can, so the bad debt shows as settled on your credit file as soon as possible, even if it isn't costing you anything.

But if the Ikea and credit card are just normal 0% deals fine to let them run to term. At the same time, keep an eye on your budget, saving for annual and irregular expenses so you can pay for things like insurance, car repairs, white goods replacement without borrowing. Also to save for the bathroom - paying for this out of savings instead of using credit will be an achievement to be proud of and help put you in a much better financial position.

Have a look at:

https://ukpersonal.finance/flowchart/ and

https://www.moneysavingexpert.com/family/money-help/ for a systematic plan to review all expenses to check you're not paying too much for phones, broadband etc.

I'd snowball as the other as had said. Stop overpaying all the debts, pay the minimums and concentrate on paying the debt with the highest interest or shortest term 0%.
Keep the savings for emergencies.

So say you have £800 plus per month plus £155 of overpayments you were making, that's £955 pm to throw at the debt.

I would start with store cards and move onto credit card then ikea. You could have this done in under a year.

Once all debt is repaid, build your savings, you could have £1280pm to put away for long term and bathroom refurb.

Ignore the mortgage for now and make a lump sum reduction with your savings when you remortgage.