Loan repayment apps and other advice

Hello all. So, I know some of this has been discussed but I can't find the thread, so apologies but here it is.

So I currently owe £1690 on my credit card, which is at 0% interest (balance transfer) but only until February 2020 when it will leap up to 22%. I was paying this off nicely but now realise I have also got...

... £6800 of student loan debt, which is only 1.5% which is less than inflation and all that, and the considered (UK) advice is - don't overpay them https://www.moneysavingexpert.com/students/student-loans-repay/

 

What I need is some advice on which to pay, and ideally, as really good loan repayment calculator because I am *hopeless* at interest.

 

Any ideas, please?

thanks in advance :)

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  • I would do whatever it takes to pay the credit card debt off by the end of 2019 (that way there is a small cushion of January 2020). Basically 242/mo starting in June (assuming you are not making additional purchases during this time). I wouldn't worry too much about the student loan in the meantime, just pay the minimum required until you get rid of the credit card debt.

    Like 1
      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
      • Reported - view

      jenmas I had been paying at £190 a month and not using it, which would have beat the February deadline. However, Student Loans Company want £350 a month which impacts the credit card payments a lot.

      I can put off SLC though. I mean, honestly, since I'm abroad I can thumb my nose at them but it's not really the best idea since I'd like to go home one day! I have been paying them at £50 but it turns out that was nowhere near what they want. :(

      The student loan has come out of leftfield (yes, I know, financial idiot...) but I guess that low interest rate for a few more months isn't the priority?

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      • monkeyhanger
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      • monkeyhanger.1
      • 1 yr ago
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      lindsay_g Well that changes my response to the first topic slightly. Pay the student loan what you have to and no more. Pay as much as you can afford to Barclaycard before the 0% interest period finishes. If you can't get it all paid off in time then you will pay 21.9% on the remaining balance so it's at that point that you need to do the maths. Does it make sense to refinance that at a 1.9-3% flat fee or suck up the 21.9% short-term until it's gone.

      Not being in the UK may affect your ability to do another balance transfer unless you still have a UK address but being non-resident for student loan purposes but resident for refinancing can get a little tricky sometimes.

      Like
  • Also, remember that once the interest rate-free period is over, you will be charged ALL of the accumulated interest since you did the balance transfer, not just on the Feb 2020 balance going forward. So it pretty much becomes mandatory to pay the CC off before then   

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      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
      • Reported - view

      CallMeCat NO WAY!! Is that right? Woah. Student Loans Company are going to have to suck it up then, because I transferred about four grand. More, actually. Can they really do that??

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      • CallMeCat
      • Silver_Keyboard.5
      • 1 yr ago
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      lindsay_g  Yes indeed. I worked for a bank and the full amount of interest owed is  normally assessed to the account the DAY after the offer expires. It's all in the fine print.  You can call your bank to confirm, but that is def. the way it works in the USA...It's fine, as long as you pay it off in (plenty) of time say by 12/31/19)...Give yourself  a   4 week cushion to be sure, so they can't say your last payment didn't post 'in time' ...banks are nasty :-)

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      • Vibrant
      • No more counting dollars, we'll be counting stars
      • vibrant
      • 1 yr ago
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      CallMeCat this is NOT universally true and I would say is more rare than common for balance transfers in the US. I just checked the terms of my Citi card and it clearly states that the *unpaid* balance becomes subject to the standard rate. 

      It's more common for *purchases* at a promotional rate to have a deferred interest clause, but not BTs.

      Like 1
      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
      • Reported - view

      Vibrant Yes I think that's right. I checked the website and it says this...


      When will I pay interest?

           If you lose your promotional rate: your offer will end early if you go over your credit limit, miss a payment or pay less than your contractual minimum monthly payments. We will then move your remaining balance to your standard balance, and charge interest on it at your simple standard rate. Your simple standard rate moves up and down in line with the Bank of England Base Rate.

           When your promotional period ends: if you haven’t paid off the amount you transferred when your promotional period ends, we’ll move it to your standard balance and charge interest on it at your simple standard rate. Your simple standard rate moves up and down in line with the Bank of England Base Rate.

           If you make purchases: You can buy things with your Barclaycard, but remember, to avoid standard interest you need to pay your full balance, excluding any promotional balances each month or interest will be charged on anything new you buy from the day the transaction appears on your account. Don’t forget to make at least your minimum payments on time and stay within your credit limit.


      So that's what you are saying.

      It also says

      How do I pay my transfer off?

      When you pay us, we’ll use your payment to reduce balances with the highest interest rate first. If you’ve got two promotional balances at the same rate, we’ll pay off the balance on the one that ends first.

      Which makes sense, because I was paying interest before (but not much) and then it went to zero. So that was the bank putting the payments towards the interest-bearing part of the debt.

       

      I really wanted to get this done, but I'm thinking I should chip away the student loan instead. Really not what I wanted to do. :(

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
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      Vibrant Yeah, it's those X month same as cash financing deals that will backcharge the interest if you don't pay it off.

      Promotional/introductory rates just expire and then you start getting the regular rate applied.

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      • monkeyhanger
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      • monkeyhanger.1
      • 1 yr ago
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      CallMeCat It's not the way it usually works in the UK.

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      • CallMeCat
      • Silver_Keyboard.5
      • 1 yr ago
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      monkeyhanger  & lindsay_g  My bad..I read the original post as "0% balance transfer", not "0% new card introductory rate".  Yup, those are definitely different animals. Apologies if I confused the situation..but still, doesn't hurt to check the fine print and avoid a (very) nasty surprise, right?

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      • monkeyhanger
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      • monkeyhanger.1
      • 1 yr ago
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      CallMeCat I'd agree to always check the fine print but 0% balance transfers to credit cards also don't work that way in the UK. You only pay interest on the remaining balance at the end of the 0% period.

      (Store based interest free credit used to do as you described and caught many people out but I don't know if that is still legal. There was quite a shake up in legislation in 2010 and I've not kept up with that aspect of it).

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      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
      • Reported - view

      monkeyhanger Yes this is right, I have double checked. It wasn't an introductory rate, as I have had this card for years and years. This was a transfer onto my existing card of credit card debt elsewhere, with a 0% rate for (I think) 18 months.

      However, when the free rate runs out only the amount still owed will get charged at the normal rate. Their idea is clearly that once you have little debt with them they find a way to encourage you to get a ton more, and hope you don't manage to pay it off. Rotters.

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      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 1 yr ago
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      lindsay_g They don't need that to happen. Presumably when you did the balance transfer you paid between £19-30 per £1000 borrowed. They've made their money right there.

      Like 2
      • bevocat
      • Sometimes, It Just Sucks to Be You
      • bevocat
      • 1 yr ago
      • Reported - view

      monkeyhanger I swear I did a zero-fee zero interest balance transfer a year or two ago. Maybe it wasn't zero, but it must've been nominal at most or I wouldn't have considered it. I know it's by no means common though.

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      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
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      bevocat monkeyhanger Mine was about 1.5%. I vaguely remember it as being about 100 or 200 pounds - but yes, that's the trick; you have a massive debt, so adding a further hundred or so doesn't seem much to get out from under the weight of the interest. And of course if you continue spending they charge interest on that.

      Luckily the UK financial regulators have tightened it up so that the bank puts payments on interest and interest-bearing transactions first so you end up with zero interest later. I do remember in the old days they did it the other way round. It was depressing things like this that switched me off money matters - I felt as though I could never win.

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      • monkeyhanger
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      • monkeyhanger.1
      • 1 yr ago
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      lindsay_g It's not a trick. Borrowing money commercially is never free. It's the cheapest way you can borrow money in the UK. 1.5% is a tiny interest rate, cheaper than loans and cheaper than most mortgages.  People do make the mistake though or assuming these deals are free when in fact the low interest is front-loaded as a bank transfer fee. 

      As with any borrowing you do need to do the maths to work out what is the best way for you to do it financially. It's often dependent on whether you could get another BT when the first one runs out but it can make more sense mathematically to transfer to a 6.9% for the life of the balance offer rather than a 0% for 12 months with a 21.9% standard rate, for example.

      The APR (which includes fees) was designed as a way to more accurately compare the cost of borrowing but it's not perfect so a bit of maths certainly help.

      The newer student loans in the UK are an interesting concept. From what I understand, they are essentially a graduate tax. You pay x% per annum if you earn more than £y for z years. If you're not earning £y, you don't pay it and any balance is written off after z years. 

      https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/

      Like
      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
      • Reported - view

      monkeyhanger Yes, the more recent loans are quite controversial actually. The politicians who are introducing them are all of an age that they benefited from free tertiary education, AND student grants. When they were at university they saw producing skilled graduates as an investment and were happy for the country to fund their living costs as well as their tuition.

      Now they are past all that, they see students as a cost and expect them to cough up.

      Of course, it means a loss of talent from those less able to contemplate debt - basically those from lower income families.

      I'm lucky in that my loan is an earlier one, so the interest is pegged at close to base rate. But many of the newly qualified teachers at work I meet are carrying - at the start of an essential but very low-paying career - with £40-45k of debt (in the $50-60k range).  And it's adding up fast.

      No wonder the UK is falling apart at the seams. Why you wouldn't invest heavily in education and health is beyond me. I suppose it leaves lots of money spare for tax breaks for the super-rich....  Anyway - I'm hijacking my own thread here!!

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  • I would pay the minimum payment toward student loan and prioritize paying off the CC debt (ideally before the 22% rate increase). The interest you save by paying toward the student loan during the introductory CC period will be quickly exceeded by the comparatively larger interest you have to pay on the CC once the intro period ends.

    http://www.whatsthecost.com/snowball.aspx is one calculator that considers an introductory rate and will work well for your two-debt scenario.

    Like
      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
      • Reported - view

      dakinemaui Thanks very much for the link. According to that site I follow the main advice on here and clear the CC by January, putting minimal amounts on the Student Loan (it is less than they say I have to pay, but they can't do anything about it and anyway, I'll write and explain). Then I throw the rest at the Student Loan (which will make it the amount they want).  It won't even take that long - July 2021 and I bet I can pay more quickly if I try.

      You know, they really should have taught us some of this stuff at school. It really worries me how hard I find it to understand.

      But thanks, everyone, for the input, it's been very useful. :)

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      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 1 yr ago
      • Reported - view

      lindsay_g  You might find the calculators on this site useful particularly if you're weighing up whether to do another balance transfer at some point. 

      http://www.stoozing.com/calculator/

      The website doesn't look like much but I 'know' the two originators from the (now sadly no more) motley fool uk financial forums.

      Like
      • lindsay_g
      • Beige_Banjo.3
      • 1 yr ago
      • Reported - view

      monkeyhanger Motley Fool was great. I saw sadly a little while ago it seemed to have turned into some money-making horrible sales site. Very sad, it used to be very welcoming and fun.

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    • lindsay_g monkeyhanger Wasn't Motley Fool bought by someone?

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      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 1 yr ago
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      Turquoise Major Don’t know. I mainly used the forums and they disbanded them. Some of the regulars set up an alternate forum, Lemon Fool.

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  • Just to add my 0.02: As others have said, prioritise your Credit Card.

    Have you called the Student Loans Company? It's been many years since I dealt with them, but I remember my friend from Uni managed to negotiate a deferral and longer loan period with them. He laid it on heavily that despite his income, he couldn't afford their repayments.

    This was 19 years ago though, and I know things have changed a lot since the introduction of tuition fees.

    Regarding the credit card, is there any reason you can't shift to another Balance Transfer deal if you don't pay it off in time? Sainsburys are offing fee-free balance transfer, so if you're accepted you could shift the Barclaycard to that one, pay the minimum required to clear the debt by the end of the period and possibly increase your payments to SLC to keep them happy?

    I feel your pain though, It wasn't easy getting out of student debt 19 years ago... I'd hate to think what it's like now.

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      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 1 yr ago
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      Turquoise Major Student Loans have changed fundamentally since then. I’m so old that I had one term of student loan!

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      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 1 yr ago
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      Turquoise Major The Sainsbury’s credit card does look good if the transfer is done in the first 3 months and if lindsay_g is still a UK resident*.  The assumed limit is low but enough for these specific circumstances. 

      *I’m assuming that’s the tax definition. Getting a new credit card while living overseas can be tricky sometimes but there are workarounds (some would be against the T&C).

      In the meantime, I’m off to see if that card could work for some building work we might need to finance...

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    • monkeyhanger Yep, the assumed limit does seem low, however I applied for one (and was approved) to cover the debt we incurred on our journey through IVF and the given limit was much higher and easily covered the amount I wanted to transfer.

      Like 1
      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 1 yr ago
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      Turquoise Major Thank you.

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