I have £300 to pay off towards a debt which should I pick?

[Marleya]

Very catalogue is currently £1083. Interest rate 39.9% APR minimum payment of 7% of balance or £5.

Capital one is currently £397. Interest rate 34.9% APR. Not sure on the minimum payments I normally pay between 15-20 a month

Next account is currently £215. 24.9% APR and I normally pay the monthly minimum payment between 10-15

I am leaning towards paying 300 off to very as their interest seems the highest and it is the one I am struggling to pay off the most

OR

I could pay my O2 contract off at just over £330 (no interest) and reduce my monthly phone bill from £55 to £7 by swapping to a sim only deal... not sure whether to do this and use the money that would have gone on my phone to pay off Very?

Ive been brought up with no financial help so this is all a big hole to me but I am determined this year to pay debts off. I have done really, really well at managing my money so may be able to pay a bit extra on all each month

Thank you so much everyone. I really appreciate any help and I am going to have a look into everything this morning. I started off with the catalogue and just bought whatever I wanted/needed and it went from there because, say I needed to buy DD a new coat I would order off Next because I didnt have the physical cash from repayments

I have brought the debts down a lot and I really am determined for this year to close them all. Ive learnt so much this past year on how to budget, I wish I hadn't jumped into catalogues and cards but we live and learn 😊

Keep trying to pay a bit extra, even if it's £7 instead of £5. It adds up

I would pay it off the Very card.
How much money do you have each month to pay towards these debts? I don’t mean just paying off the minimum - if you did that you’d be paying an awful lot of interest for years!
If you have, for example, £200, you’ve got £55 on your Phone for 6 months leaving £145 for everything else. Your Very balance will be around £700, and as that’s the highest balance with the highest interest you should pay the most on that account. So pay £100 a month on that and £20 a month on the others - set these up as standing orders so that you won’t be tempted to only pay the minimum. In 6 months, swap your phone to sim only and use the £50 you save to increase the standing orders to your cards - £20 / £10 / £10.

The debt is manageable, you sound like you you're on the right track so stick with it. My friend is in £40k worth of debt, not quite sure where to start with that one!

You’ve had some great advice and I can’t add to it, just wanted to suggest checking eBay and Facebook marketplace for good quality second hand clothes as there are some massive bargains out there

You’re doing great.

I’d pay off Capital One by hook or by crook. Even if you can’t make the £97 this month you could probably do it next month.

Set up your standing order to Very as high as possible that you can afford every month, and in the meantime look at what balance transfer options are available. Even 6 months at 0% would really help you.

Work on Next slowly but steadily. Do not buy more on it!

Save up a little buffer fund (even just £100) in case of emergencies.

Just wanted to say your attitude is absolutely fantastic. Keep going, there is light at the end of the tunnel.

Well done on getting your debt sorted OP.

I was lucky in that it was something I learnt pretty young after spending the "free" money in my student overdraft. Thankfully I didn't ever take up the banks offer of a credit card! Even though they offered it about every 6 months
I was pretty much at the £3K limit when i finished.
It was 0% interest for 12 months after graduation as well but only being able to get part time work as that year went past made panic!
I was at home & my parents didn't make me pay rent so i just had to pay my expenses like car & phone & gifts. I had it easy really but i vowed never to get into my overdraft unless absolutely necessary after that.

It is perhaps worth ringing all three up again ( I know that you've already called Very) to say that you're unable to afford anything but the minimum payments.

Eventually this will push you into a position called persistent debt www.moneysavingexpert.com/credit-cards/persistent-debt-help/ and they may be obliged to negotiate better interest rates with you. Therefore do it now and they may be prepared to negotiate on the interest rate ( they may well freeze the card but tbh that's no bad thing).

Good luck with it. It certainly doesn't sound unsolvable and it sounds like you're very determined to get it resolved.

Snowballing is a good thing to do but one of the principles is that you pay the highest rates of debt off first, so that you get less and less sources of debt and they’re more manageable. So paying off Next whilst keeping very is not the right thing to do in this case as you’d be prioritising lower interest rate debt rather than higher.

Agree with looking at balance transfer deals - just watch 2 things. 1 there is usually a fee (~3-4%) to transfer. So focus on transferring the larger balances that will take longer to pay off. And secondly most cards have different interest rates for transfers and spending. Then when you pay off you might pay down your lowest interest rate balance first, so unintentionally build up an interest bearing balance. To avoid this only use the card for the balance transfer(s) and spend nothing on it until it is fully cleared.

I don’t think I would approach lenders for adjustments at this stage because it sounds like your debt, while high interest, is now manageable for you and you have a plan to pay more than the minimum on each. I think you’ve got this under control or are very close to. So rather than risk blotting your credit record (which is worth looking at anyway, just to check there’s no stray information on there) I’d make the payment towards one of the debts (I agree advice is to pay off the highest interest one first but personally the psychology of paying one off in full and having one less account to deal with would be a big boost for me to push to pay the others off - I know that might not make sound fiscal sense!) and then snowball payments, as well as making extra odd payments where you can without leaving yourself short or vulnerable to taking on more debt.

Highest interest rate first

Snowballing is paying towards the highest interest rates first, not the lowest! Do this, but please speak to one of the debt charities to make a longer term plan.

When I was in debt similar to yours, I spoke to a debt charity and they advised to pay off the lowest item first. Then, take that money and pay off the next lowest.

You get the satisfaction of seeing debts clear one by one, and by the time you are down to just the largest debt, you have the biggest amount of available money to pay towards it.

I have downloaded an app and worked out if I paid the £300 to Very and kept up with the minimum payments plus an extra 40-50 split between all 3 I would pay them off by May 2023, maybe even earlier if I add bits which I more than likely will, from Birthday/Christmas money etc.

Is this snowballing? So I don't start using Capital one card to pay Very off or should I?

I think I am better off sticking to a "snowballing" plan as I think combining all to 1 card would leave me worse off

So if I paid Next off, I would have 85 to put on Capital one bringing the balance to 315. Then, do I use the Capital one card to pay more off Very? Or stick to payments myself

Stepchange just advised to try freeze the debts and lower repayments and interest but obviously that would effect my credit rating so I think now it is between paying Next off and starting from there or taking a big chunk of Very off and carrying on with minimum payments plus a bit extra

Pay what you can off the highest interest, but for all of the accounts, try to pay more than the minimum and keep the payment at that level, so it gets paid off quicker.

Eg if the minimum payment is £48, instead of just paying that amount, and next month paying £47 etc etc, cancel the direct debit and set a standing order for £50 if you can manage it. This pays the account of years quicker, saves a huge amount of interest and removes the minimum payment marker from the account, which will make your credit history look much better.

Also look at Moneysavingexpert money makeover for a systematic review of your budget, ways to increase income, cut all expenses and signpost to help/balance transfer offers that you might qualify for.

@Marleya

Stepchange just advised to try freeze the debts and lower repayments and interest but obviously that would effect my credit rating so I think now it is between paying Next off and starting from there or taking a big chunk of Very off and carrying on with minimum payments plus a bit extra

Whether you're in that position depends on whether you can afford to cover basic expenses as well making credit card payments.

You should not be skimping on food or essential bills in order to make unsecured debt repayments and you have to be wary of the cost of interest as you don't want to be in a position where your payments are barely covering the interest and you could be plugging away for years without getting very far as most of the money you pay just covers the ongoing interest. If that's where you are, a more formal solution might be best, even if it spoils your credit rating.

@Marleya

So if I paid Next off, I would have 85 to put on Capital one bringing the balance to 315. Then, do I use the Capital one card to pay more off Very? Or stick to payments myself

If you do that, add the £10-15 (so £12.50) to the payment for the next card you want to clear. And fix the payment. So if you currently have a min repayment of £76 on the Very account, make the repayment FIXED at £88.50. Dont let the payment fall as the balance decreases. If the phone will be payed off in 6 months, in Setember, add the £40 extra from that onto a repayment too.

@Marleya

The only 0% card I have found was as far as Im aware 0% interest for 6 months then 49.9% APR ?

Could you manage to pay the whole amount off in 6 months?

Well done on working on your debts OP, it's not easy but you seem to be on the right track! I listen to Dave Ramsey podcasts on Spotify, it keeps me motivated to stay away from interest free credit and opening credit cards!

Good luck 😊

If I were in your situation I’d contact Citizens Advice and ask to speak to a specialist debt advisor. They can help you get on top of your debts, including negotiate agreements with any debtors about reasonable repayment term and also help you come up with a strategy to stay debt free. You don’t need to go into an office to access advice, you can often do it by phone although you might need to wait a few days for a call back because demand is high. Good luck!

Sorry, I’ve just seen that you’ve already spoken to Stepchange. If you think you can continue to make payments high enough to clear the balances and keep on top of the interest rates by all means do that. If not I’d really think hard about taking their advice to make repayment agreements. These can affect your credit rating short term, but it’s also easy for high-interest unsecured debt to spiral out of control and that has an even worse impact on credit ratings.

Get rid of the next account. That's what I am trying to do...