What debt to pay first with poor credit score

[batchy_21]

Forumite
1 POSTS

Hi Everyone hope you’re all well

I was after some advice on what to pay first. Unfortunately I don’t have a great credit score due to an old default from April 2016 so I am limited on certain things like 0 percent cards.

Myself and my partner also managed even with a default to be accepted on a mortgage which was 95 ltv from Halifax last November fixed until November 2021 so again although the house has risen in price I am worried about re-mortgage and wonder if it’s worth trying to get to 85 LTV

I am fortunate especially in this climate to be able to work overtime and to try and pay my debts off

So my debt is listed below

Halifax CC balance £3800 0 percent until Sep 2021 then 18.9 Apr pay minimum £50 a month

PCP 10.9 percent balance £14500 if paid in full or minus £6878 balloon payment £276 a month until March 2024 (high I know, however was given an extra 2 year warranty if taken)

Halifax Mortgage balance 152500 3.17 APR then variable at 3.74 APR monthly £768 split between us mortgage over 22 years. House value around 175k

Thanks all any advice I would appreciate

[Joanna Connolly Solicitors]

Hello

I can see that you joined the forum nine years ago (2011) so I'll take a look back at your other threads to get a feel for your overall situation before making any suggestions.

It seems your aim/goal is to remortgage at a better interest rate (APR) than your current interest rate which is fixed until more or less this time next year. However there's no knowing what interest mortgage rates will be on offer then. None of us has a crystal ball.

There's also no knowing what property prices/values will be in November 2021. You say the house has "risen in price" so you'd like to remortgage at 85% LTV but in November 2021 house prices may have crashed (I do hope not!)

You also refer to yourself and your partner having the current mortgage (have I understood that correctly?) so their overall financial situation may be relevant.

A little bit more information on your current "debt" situation may help. I'm assuming that by "debt" (your word choice) you mean money you owe simply because you borrowed it, not accounts which have arrears issues etc?

Di

[batchy_21]

Hi thanks for your reply. You are right no crystal ball, however I hope the house prices stay the same or increase, however we don't know!. Yes my wife and I have a joint mortgage (not in arrears) just took advantage of only a 5 percent deposit at the time.
Yes the debts are what I owe none in default or arrears and all mine. I just want to start overpaying and wasn't sure where to concentrate the overpayments on. I was thinking the CC as the 0 percent runs out in Sep 2021, however wanted peoples advice on what they think would be better to overpay first. I am mindful about trying to reduce the mortgage down to 85 ltv to help in the future where my wife could overpay slightly
Thank you

[Joanna Connolly Solicitors]

I just want to start overpaying and wasn't sure where to concentrate the overpayments on. I was thinking the CC as the 0 percent runs out in Sep 2021, however wanted peoples advice on what they think would be better to overpay first. I am mindful about trying to reduce the mortgage down to 85 ltv to help in the future where my wife could overpay slightly

I can't give you financial advice because that requires FCA authorization, but I will make a couple of general comments about timing.

You say you have a Default on your CRA file from April 2016. This would have impact on any credit/mortgage application and the interest rate offered. That blemish (whole account entry) should be removed from your credit file in April 2022 which would be not long after your mortgage fixed rate term ends (in November 2021). In theory you should be able to get a better remortgage deal having no Default on record. Something you might like to discuss with a broker (who should be FCA authorized).

Your Halifax credit card has 0% interest so overpayments would reduce the balance, but not making overpayments would not be detrimental if you're not being charged any interest until September 2021.

As I said, I cannot give you any financial advice.

Personally I like to keep some funds as contingency in case the unexpected happens, and in case lending patterns change e.g. a number of creditors are currently reducing balances on credit limits as the borrower reduces the balance etc.

Di

[flatiousa]

1. Repay Your High-Interest Credit Card Debts First. One of the main reasons to repay debt early is to save money on interest payments. While interest helps you spread out payments into more affordable chunks, you will pay more than if you paid in full.
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Why you should pay off the smallest account first

The snowball method works because paying off a debt in full incentivizes you to keep working towards your goal—and as you pay off your smaller debts one by one, you'll have more money to put towards your larger debts

[Roger]

Which to pay first?
Well start by creating your own payment plan
List your debits plus a savings pot and your available income
Then formulate your own payments strategy - But my advice is build up your savings pot don't put all of your eggs in one basket!
Savings is the route out of debt! Its also empowers you in deciding debt priorities.

Its actually a good idea to create a separate file/folder for each debt using the AAD guidelines because this is the solid basis for taking control over your money!

[Warwick65]

Just an additional thought.

Does your PCP loan allow for overpayments - some loans do not or the benefits are very small.

There seems little point in paying off the 0% finance just at the moment but you might want to save a pot so once interest kicks in you can pay it all off - that would probably be a better use of your money than overpaying the mortgage everything else being equal.

Have a look at bank accounts, some offer a much better rate if interest than savings ones. I have one that pays me 2% a year on £1000 so about £1.70 a month which buys me a coffee . I would rather have my coffee than pay off my small 0% balances.