Solving debt puzzle
Discussion
Hi.
Didnt know if this is the right pistonheads area, but it was the most related one
I have a credit card debt and want to solve it ASAP. But I do not have emergency money, which is important.
I can
a) save some emergency money and pay the card (not much more than minimum). W hen the emercency money is enough, I can clear the debt
or
b) pay bigger chunks, clear the debt faster, but no emergency money saved.
Arguably I'll pay less interes in option b), but having the emergency money feels important.
The other doubt is related:
I can pay even bigger chunks (in both cases), but use it to do my groceries shopping or, shop the groceries with cash. What makes more sense?
PS: I know that I should not have this debt, but I have it even if I dont like'em. So please be lighthearted with me.
Didnt know if this is the right pistonheads area, but it was the most related one
I have a credit card debt and want to solve it ASAP. But I do not have emergency money, which is important.
I can
a) save some emergency money and pay the card (not much more than minimum). W hen the emercency money is enough, I can clear the debt
or
b) pay bigger chunks, clear the debt faster, but no emergency money saved.
Arguably I'll pay less interes in option b), but having the emergency money feels important.
The other doubt is related:
I can pay even bigger chunks (in both cases), but use it to do my groceries shopping or, shop the groceries with cash. What makes more sense?
PS: I know that I should not have this debt, but I have it even if I dont like'em. So please be lighthearted with me.
How much interest do you pay on your credit card?
Do you have a good credit rating i.e. could you get a 0% balance transfer credit card to transfer the amount to meaning you could pay it off without incurring interest?
How much do you need to pay off and roughly how do your monthly finances break down?
Do you have a good credit rating i.e. could you get a 0% balance transfer credit card to transfer the amount to meaning you could pay it off without incurring interest?
How much do you need to pay off and roughly how do your monthly finances break down?
The first thing to accept is debt in itself is not necessarily wrong. Affordable debt is okay, unaffordable debt is not. You appear to be in the former category.
So, accepting that you have two desires, to clear the debt and to acquire some emergency savings. Both admirable.
Can you not split the surplus you have, half to clear the debt quicker and half to savings?
Can you look to transfer the credit card balance to another one with an interest free period?
Is your credit rating okay?
So, accepting that you have two desires, to clear the debt and to acquire some emergency savings. Both admirable.
Can you not split the surplus you have, half to clear the debt quicker and half to savings?
Can you look to transfer the credit card balance to another one with an interest free period?
Is your credit rating okay?
Foliage said:
how much is it? do you own your home? how did you purchase your car?
£5.5k / Rent / Dont have a car (dont need it)mackay45 said:
How much interest do you pay on your credit card?
Do you have a good credit rating i.e. could you get a 0% balance transfer credit card to transfer the amount to meaning you could pay it off without incurring interest?
How much do you need to pay off and roughly how do your monthly finances break down?
Roughly 35% goes to rent, 10% to house bills, 15% in groceries, 10% to a finance, 5% to "fun". 25% are more than the minimum payment, but less than total payment.Do you have a good credit rating i.e. could you get a 0% balance transfer credit card to transfer the amount to meaning you could pay it off without incurring interest?
How much do you need to pay off and roughly how do your monthly finances break down?
Countdown said:
Why do you think you need the emergency money?
I'd pay the CC off as soon as possible. If and when you need some emergency money you can always borrow on the CC again, but there's no point paying interest on money that you don't need at the moment.
Having a kid I'm always afraid of some undetermined emergency. And If my parents health goes poorly in Brazil, I want to be there. Irrational but...we're not 100% motivated by logic. I got your point about "paying interest in money I don't need, is a good thought.I'd pay the CC off as soon as possible. If and when you need some emergency money you can always borrow on the CC again, but there's no point paying interest on money that you don't need at the moment.
PurpleMoonlight said:
The first thing to accept is debt in itself is not necessarily wrong. Affordable debt is okay, unaffordable debt is not. You appear to be in the former category.
So, accepting that you have two desires, to clear the debt and to acquire some emergency savings. Both admirable.
Can you not split the surplus you have, half to clear the debt quicker and half to savings?
Can you look to transfer the credit card balance to another one with an interest free period?
Is your credit rating okay?
Yes it is affordable, I just do not know if Its better to pay it faster or slower. Dont want to take more than year to pay it, but having no spare change for some months is not ideal as well.So, accepting that you have two desires, to clear the debt and to acquire some emergency savings. Both admirable.
Can you not split the surplus you have, half to clear the debt quicker and half to savings?
Can you look to transfer the credit card balance to another one with an interest free period?
Is your credit rating okay?
No idea about my credit rating. But probably not good. I'm not from UK or EEU , I'm living in a rented house for less than 7 months, in my new job just for 8 months, no right to vote. I'm assuming its not good.
DuraAce said:
Pay debt ASAP.
Save money for rainy day afterwards.
Use credit card for real emergency only.
This. The faster you pay your credit card debt, the less interest you pay (which lines someone else's pockets, not yours).Save money for rainy day afterwards.
Use credit card for real emergency only.
As you pay down your credit card, this 'emergency money' requirement you have is still your credit card's limit, you're just paying less to have access to it.
Debt interest almost always outstrips any interest gained from savings. Pay down debt.
When you have paid down all your debt you'll have more spare money for savings funds, because you won't be paying any interest. win win.
Also, it feels great having no debt
At that rate I would definitely clear the debt as quick as possible, knowing that if you do need it in an emergency the card is there.
As said above, however much you are paying on the card now, can then go on top of what you would have saved anyway.
I am having the same chat with myself and understand how nice that psychological buffer is - but that's because my card is still at 0%.
I'd get the debt cleared as soon as possible in your situation.
As said above, however much you are paying on the card now, can then go on top of what you would have saved anyway.
I am having the same chat with myself and understand how nice that psychological buffer is - but that's because my card is still at 0%.
I'd get the debt cleared as soon as possible in your situation.
At that interest rate it makes no sense at all to sit on cash.
Almost any conceivable emergency that would result in you needing to find money, wouldn’t require you to find actual cash, ie plane tickets to Brazil can be paid for on card, etc etc
Next to 0% interest on cash in hand but nearly 20% on your borrowing - much better for you to clear the debt ASAP
Almost any conceivable emergency that would result in you needing to find money, wouldn’t require you to find actual cash, ie plane tickets to Brazil can be paid for on card, etc etc
Next to 0% interest on cash in hand but nearly 20% on your borrowing - much better for you to clear the debt ASAP
Totally agree with the above: pay the credit card down, and if an emergency happens then you just load it up again. The maths is simple - using round numbers...5k debt, 20% annual interest, and say you're paying off 250 quid a month. If you don't pay anything off the card, and you save it all, after one year:
You will have 3k saved up. You will owe 6k on the card. If you have a 3k emergency, you will use up all your savings and still have a 6k debt. If you don't have an emergency, then your net position is that you owe 3k.
If you pay it off the card, then after one year:
You will have 0k saved up. You will owe 2k on the card. If you have a 3k emergency, you put it all on the card and have a 5k debt. If you don't have an emergency, your net position is that you owe 2k. Either way, you are 1k better off than if you had saved.
Simplistic and full of holes the above may be, but the principle is sound. Interest is the killer and you will be better off paying down the card without question.
You will have 3k saved up. You will owe 6k on the card. If you have a 3k emergency, you will use up all your savings and still have a 6k debt. If you don't have an emergency, then your net position is that you owe 3k.
If you pay it off the card, then after one year:
You will have 0k saved up. You will owe 2k on the card. If you have a 3k emergency, you put it all on the card and have a 5k debt. If you don't have an emergency, your net position is that you owe 2k. Either way, you are 1k better off than if you had saved.
Simplistic and full of holes the above may be, but the principle is sound. Interest is the killer and you will be better off paying down the card without question.
Gat a balance transfer card, asap. Look at monevsavingexport.com which has a tool you can use to see how likely you are to be accepted for these cards, so you can judge whether to apply or not. I've balance transferred to 0% loads of times and it saves a fortune whilst you pay it down.
Good luck and don't be hard on yourself.
Good luck and don't be hard on yourself.
ElectricSoup said:
Gat a balance transfer card, asap. Look at monevsavingexport.com which has a tool you can use to see how likely you are to be accepted for these cards, so you can judge whether to apply or not. I've balance transferred to 0% loads of times and it saves a fortune whilst you pay it down.
Good luck and don't be hard on yourself.
That's what I did, then a bank loan for the last bit. I now have savings. I was in exactly the same situation as the OP 5 years ago.Good luck and don't be hard on yourself.
Took a look at these 0% cards in moneysavingexpert.com ... not sure if I can transfer all the balance. For my situation I can find cards with 0% for 6 months, which is already some help.
But maybe as Foilage did, I can take a loan for the balance I cant transfer (if the interest is lower than my card's, obviously)
Thanks very much for the answers!
But maybe as Foilage did, I can take a loan for the balance I cant transfer (if the interest is lower than my card's, obviously)
Thanks very much for the answers!
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