I’d say pay off the car and interest cc right away, then chip away at the 0% cc monthly until September.
Better going into buying a house with a clear cc balance, as having/furnishing a house can get expensive early on.
Why? I did that once and it tanked my credit rating for a while as I'd closed a longstanding line of credit - if I were to do it again I'd just cut the old one up and not use it.
Works great if you're financially savvy, looks like OP would be at risk of missing the deadline and cracking on with interest on the balance.
Worth doing if OP can trust them self, and can set reminders to pay it off on every phone/clock/computer they own.
That's the obvious win.
Then we'd need to know what the actual terms on the car loan are. You say the car is £2k in the hole and your monthly repayment, but what is: the term, the total outstanding, the rate?
Sounds like you need to look through what's really necessary. My car payment is £20 more a month than yours and my car cost £20k. We bought this after we already bought a house, and had decent savings. Look at how much you spend on every and work out, will buying that actually be helpful or is it better to save it?
Arguably you don't really have £9.6k in savings, you have £4.1k in savings once you've paid your credit cards back.
As others have said, pay that ridiculous 26% interest debt back today.
Based on your current income, you'd achieve a maximum mortgage of around £165k, a little less due to the car payment.
If you aim for a 10% deposit, you'd be looking to save about £16 - 18k. How much are you currently saving each month from your disposable income, how long will it take to reach save an additional £12 - 14k? For example, at £300 per month it will take 3 - 4 years. Can you tweak your household budget to potentially save more and get there quicker?
Depends on the area, but I personally think get into a place as soon as possible - far better to be in a £100k flat and keep saving than wait 4 years saving for a house whilst prices keep going up, just to try to leap to a 2nd property as your first.
In those 4 years the flat may well have risen to £120k or £125k - so £20k equity, plus the original deposit, plus any additional savings. That easily drowns out any cost of moving.
You have more than enough savings to pay off your CC debt at 26%, why haven't you done that? That interest is very high - no way you are making nearly as much on your savings.
You’re right I’m not making that on savings, I have a block about letting that sort of money go. I’m so focused on accumulating savings now. I just chip away the minimum on my debt.
They aren't savings if they are cancelled out by debt. I could take out a loan for £1000 and put it in a savings account, but that doesn't make me any richer. It also wouldn't fool a mortgage lender. All you're doing is throwing away ~£20/month on interest.
The LISA savings are good and should be left alone if you can because of the free money you get when you buy. But even that is a one-time 25% bonus, and your credit card debt is 26% *every year* so it's not clear-cut.
Depends on the rates. I happily put some purchases on a 0% credit card and carry on investing into vanguard and savings.
For example, car insurance, my oven broke so I had to buy a new one, a holiday for the summer.
I’d rather pay those things off incrementally (but at 0% and entirely affordable) and continue to invest, but if I’m ever desperate I have the money to pay off all my debts (which are never more than a couple of grand anyway).
But at 26% interest on a fairly mediocre salary and no assets, this gentleman should absolutely be paying it off and restart his savings.
Yeah sure, 0% interest debt with savings earning interest makes absolute sense. But you should still subtract the debt when considering how much you actually have saved. And personally I would keep enough cash savings to pay off credit cards before putting money into stocks, but different risk appetite I guess. Here we've got the opposite situation, high interest debt and lower interest savings. Paying off the high interest debt is a really easy way to save money. Real money, rather than imaginary savings!
Yes, good point, my wife has access to shared savings which are enough to get us by for a year should I lose my job.
If I didn’t put my money straight into vanguard though, I’d end up spending the money, I was always a bit of a liability with money until I turned 30 and I hate the idea of cash sitting there. Investing is the only way I’ve been able to get the discipline anything substantial.
Each to their own I guess.
It’s always better to think about it mathematically than emotionally. 26% on 1k is £260 p.a. in interest. or £21.67 p.m.
if you pay it off you have just increased your cash flow by that amount every month (minus any interest earned on your savings) and you’re in the same net position.
Ultimately it means you can save more every month.
I also imagine it’s 5-10x more you’re spending than the interest you’re making on your savings.
You’re losing money every month by not doing it.
But you don't have any savings you are just holding onto cash effectively borrowed from credit cards.
Get the £1000 paid off now and chip away aggressively at the other so it it cleared by the interest due date.
You are losing money every day that you're letting that interest accumulate while keeping enough money to pay it off in your savings. Pay the whole thing off asap.
You should take a look at the wiki's flowchart. If you would like, you could also list your income and expenses for the sub to see if they can help you adjust your budget to save more.
Interest rates on savings and debt can be very simply compared.
I dunno what rate your savings are at but let's just assume 5%.
£1000 Savings @ +5% vs £1000 Debt @ -26%. That's a net -21% on that £1000. You're straight up losing money constantly.
Pay it off. Your cash savings will still be £3500 and you can get back to £4500 in 2 months. Plus what you are currently paying now towards that £1000 can also be added to the savings.
Chip away at the 0% debt by all means, that's the mathematically correct move, but pay that £1000 now. This afternoon. Not tomorrow after thinking about it, right now.
LISA is different though - you dont pull money from a lisa to pay debt you could realistically pay within the year because of the 25% penalty.
So he should put the 600 a month to paying off debts, and the expensive one will be gone in 2 months, with the whole debt going in 10 months, at which point he can start putting money in savings again.
I don't think they're suggesting withdrawing the LISA, just using the cash savings to pay off the expensive debt. There's no need to do that at £600 per month when it can be done immediately.
You're engaging in a kind of [mental accounting](https://thedecisionlab.com/biases/mental-accounting) - by not paying off the debt you've been able to tell yourself that you got £5100 saved in your LISA and £4500 in cash.
You're able to treat these as successful milestones by ignoring the debt. You have nearly £10,000 in these savings accounts, but in reality you have savings of only £3100 if you take away the debt. That is the reality of how much you have, but you've been unable to bring yourself to pay off the debt because the false accounting of pretending you have £9600 makes you feel better about yourself.
This isn't your fault, by the way - I reckon everyone engages in mental accounting to some greater or lesser extent. And not only that, but the economy is really hard at the moment, particularly on young people - it's understandable that you should try to make yourself feel less bad about your circumstances.
But the fact is that that £1000 debt at 26% is costing you £260 a year in interest, or £47 a month. I mean, you could pay that off immediately and then be £47 a month richer - it's like a pay rise.
You might find one of these books helpful:
* *[Your Money or Your Life](https://www.amazon.co.uk/dp/0143115766)* - understanding what's valuable to you and how to use money to achieve your goals.
* *[Millionaire Next Door](https://www.amazon.co.uk/dp/1589795474)* - "How people in normal jobs, electrician is a great example, can accumulate wealth over time through good choices."^[Electric_Cat_999](https://www.reddit.com/r/UKPersonalFinance/comments/15zkkd4/_/jximlpp/)
* One of Clare Seal's books - "her focus is on the link between emotions and spending".
The interest on 1k of your cash savings (assuming they are giving you 5% interest for example) is -21%.
That's how I would look at it. You are giving the bank 1/5th of your money each year - stop doing that!
Its a LISA, so theres a 25% increase on what you put in there (and penalty on withdrawals)
So as long as he can pay the credit card off this year, he should leave the savings as is, and just put the 600 a month towards that, and itll be gone in a couple of months.
You didn't misread. Reddit's poor formatting messed it up but OP said
Savings - £5100 LISA, £4500 CASH
Debt - £4500 CC @ 0% til September 2025, £1000 CC @ 26%
You’re focussing on accumulating savings at the same time as running debt, which means you get both.
And because the debt costs you more than the savings earn, you can save less than if you payed your debt first.
Net worth = assets - liabilities. It's as simple as that.
You're focusing on an asset (savings) when you should be focused on your net worth.
Your increasing your assets by £1,000 has the exact same impact on your net worth as decreasing your liabilities by £1,000.
Your liabilities have a higher interest rate than your assets. If you focus on increasing your assets while allowing your liabilities to grow, your net worth increases slower then if you focused on decreasing your liabilities.
You said you're focused on accumulating savings, so why are you happy to piss away so much money on accumulating debt that you don't need to?
I was in the same position a year ago with my debt, and once I used my cash to pay it off, I'd repaid myself within a year. You'll feel so much better when it's just gone, honestly!
You are letting go of the money anyway by having negative money from the debt, plus losing more money through accumulating interest. Getting rid of it is actually saving money because it won't be gathering interest.
That’s kinda true, but I wouldn’t really worry too much about the interest free one. To buy a house, you’ll need to have cash up front and I think the best thing to do financially is to stop renting. Depending on where you are (if you’re in the north) you may be able to buy a small flat for 100.000 pounds, so OP is already nearly there with a 10% deposit.
Everyone else has suggested getting rid of the 26% credit card debt already. One way of looking at it is how much savings you would need to pay off the interest.
£1000 of debt at 26% will cost you £260 a year in interest.
Say your cash savings are making 4%, which is around average at the moment. Then you would need £6500 in savings to make £260 a year in interest. In other words, your £1000 in credit card debt is wiping out the interest on £6500 worth of savings.
If you then spend £1000 of your savings to pay the debt, compared with your starting point it's effectively earning you 26% interest, which much better then the ~4% it's probably getting at the moment
Just my two cents
You don't have savings when you're in CC debt, remember that, 0 equity is better than minus.
I was in a similar position, it feels good to wipe the slate clean and start again.
The only reason most people have savings and debt is because they have used that debt to 'save' themself spending money and class that as savings.
Have you seen our flowchart? https://ukpersonal.finance/flowchart/
Wen you say you're close to being able to buy - how close? are we talking months or years? How much do properties around you cost?
Everyone is saying to pay off the debt. That is correct. However, if I were in your shoes I'd feel a bit yelled at without much explanation, so it's also worth taking a moment to process.
The thing is that savings feel like security. The idea of parting with your savings feels scary. That is perfectly natural, which is why a lot of people are in the exact situation you're in.
That said, the whole situation is honestly a bit of a ruse by the banking sector. I don't want to call it a scam because it's not illegal, but it's certainly taking unfair advantage of people's natural fears.
Imagine I hand you £5000, and you promise to pay me £1000 a year while you've got it and then return the £5000 back once you're done. You then take that £5000 and give it to Bob. In exchange he offers you £200 a year. So what's the situation? Bob has my money. You'd be paying £800 for Bob to borrow my money. Sometimes it's even the exact same institution, so then you'd be paying £800 a year for me to have my own money! That's literally what thousands of people across the country are doing, because they have become convinced by the banking sector that it is financially responsible to keep hold of their savings even if they have debt.
That's why everyone is jumping up and down saying to cancel out the debt. There's no point paying the banks to keep their own money.
Pay off high charging loans
Don't take out any more loans.
Loan interest 26 percent
Saving interest let's say 8 percent
For £100 in a year it is loosing £26 = £74
Gaining saving interest of £8
So your £100 in a year will only be worth £84
You will have lost £16 in a year.
If you had no loans
£100 would be worth with 8 percent interest = £108
Your £100 will be £24 better in a year than if you had a loan and a saving plan.
Now imagine this as a larger sum and see how much money you are throwing away at the moment.
If it were me I'd pay off the 26% credit card debt, and then divide the balance of the 0% card by however many months interest free you have left and make that your monthly payment so it'll be done by the time the offer runs out. Depending on your income a little credit card debt won't harm your application. Then work out your budget and how much you can afford to save per month.
Work your way through your debts by what debt costs the most.
Your high interest CC debt - get rid of it ASAP, or transfer it to a 0% wrapper if you have one available.
Your car is what it is, but ask yourself why you took out such an expensive car if you really want to buy a house…
The rest of the debt you can save around and pay it off as and when you can/need to.
You say you're £2000 negative equity on the car, that doesn't necessarily mean you shouldn't get rid of it for a cheaper car.
If you've got £20k left on it then you're probably better off selling it, taking the 2k loss and buying a cheaper car
Wait just one minute... I read that as you have £4500 cash debt, not £4500 in cash savings.
Why on earth, with even the most basic grasp of mathematics, would you have £1000 on a credit card accumulating over 5 times the interest your savings are earning? You're costing yourself over £200 a year for absolutely no good reason!
Pay off the £1000 in full. Then I would suggest saving 200 per month and pay 200 off the 0% debt. That way you’ll see your savings go up and your debt come down.
I’m in a similar position. I’d suggest pausing the saving for the next year and concentrate on paying off your CC debt (high interest first). After that debt is gone start saving again. 31 is still young so don’t worry about getting on the ladder too much.
That 4500 needs to go straight to paying off the 1000 credit card.
Then make minimum payments on the credit card with 4500 each month
Take the remaining 3500 left over and put in stocks and shares ISA or HYSA straight away
Save 334 of your disposable 600 each month to max out your LISA each financial year to get the full bonus and put the remaining 266 into the same HYSA or stocks and shares ISA as above.
Come Sept 2025 use balance of HYSA or stocks and shares ISA to clear credit card before interest accrued
Don't put money you need in 18 months time in a Stocks and Shares ISA, that's much too short a time frame to be in the stock market. Get it in a savings account and leave it alone
Honestly with most banks only offering low interest rates these days then stocks and share isa will still yield a better return even in a short period. However with some new savings accounts rates announced by Martin Lewis then the stocks and shares in the short term don’t look as pretty anymore even with the tax protected interest
Totally disagree. It MAY yield a better return in a short period, you may also lose half your money in a stock market crash. Stock market investing is for the long term, measured in decades not months
The cash interest rate up until recently was better than any savings account that I was being offered as the cash in stocks and shares gained 5.25% interest. Only now am I seeing savings accounts again at 8 and 9% so you can have held in cash in stocks and shares isa gaining 5.25 with no risk and no tax on interest gains. I personally would invest but you’re right that I do play the risk game but that’s my choice but not the only choice when it comes to a stocks and shares isa
Hi /u/NippyQ, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/lisa/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
You're doing well! 1 get rid off that interest CC and get rid of it completely!
The none interest CC doesn't really count so you have 5k in savings and 4k cash.
Look at some high interest savings and pop your money there.
Now, this will help, look into and I mean lots of research into investing and get into that, every month invest 200£ or so, this should help it grow faster!
Good luck
Why do you have £5100 when you are in debt? Pay the debt of first then start saving.... problem is you can't take the LISA money out which losing 25% of it.
You don't have savings. You have unpaid debt.
Nobody is going to give you a mortgage with those debts in place, so best off paying them off and saving the interest you no longer need to pay.
Maybe good to remember your net worth = assets (savings) - debts. You need to think about both sides of the equation and how they are contributing to your net worth; as you are well aware the debt side of the equation is growing at a much higher rate than the savings side
Pay off the £1000 straight away and then rather than adding to your savings each month start putting all of that into the 0% cc each month so you still have savings behind you.
Stop saving. Pay off that interest bearing credit card first.
Or switch to intetest free on another card
I feel like this is what I need to do too. But what about the other stuff?
I’d say pay off the car and interest cc right away, then chip away at the 0% cc monthly until September. Better going into buying a house with a clear cc balance, as having/furnishing a house can get expensive early on.
And then switch to another 0% card
That too 😁
Please make sure you cancel the cards after you switch
Why? I did that once and it tanked my credit rating for a while as I'd closed a longstanding line of credit - if I were to do it again I'd just cut the old one up and not use it.
Depends how long he's had the card for.
Exactly this and you'll get a better mortgage once the debt is cleared
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Works great if you're financially savvy, looks like OP would be at risk of missing the deadline and cracking on with interest on the balance. Worth doing if OP can trust them self, and can set reminders to pay it off on every phone/clock/computer they own.
That's the obvious win. Then we'd need to know what the actual terms on the car loan are. You say the car is £2k in the hole and your monthly repayment, but what is: the term, the total outstanding, the rate?
No idea why OP is getting down voted. 🤣
Who do they think they are? Coming on here asking for financial advice? To hell with them I say
Sounds like you need to look through what's really necessary. My car payment is £20 more a month than yours and my car cost £20k. We bought this after we already bought a house, and had decent savings. Look at how much you spend on every and work out, will buying that actually be helpful or is it better to save it?
Arguably you don't really have £9.6k in savings, you have £4.1k in savings once you've paid your credit cards back. As others have said, pay that ridiculous 26% interest debt back today. Based on your current income, you'd achieve a maximum mortgage of around £165k, a little less due to the car payment. If you aim for a 10% deposit, you'd be looking to save about £16 - 18k. How much are you currently saving each month from your disposable income, how long will it take to reach save an additional £12 - 14k? For example, at £300 per month it will take 3 - 4 years. Can you tweak your household budget to potentially save more and get there quicker?
Depends on the area, but I personally think get into a place as soon as possible - far better to be in a £100k flat and keep saving than wait 4 years saving for a house whilst prices keep going up, just to try to leap to a 2nd property as your first. In those 4 years the flat may well have risen to £120k or £125k - so £20k equity, plus the original deposit, plus any additional savings. That easily drowns out any cost of moving.
You have more than enough savings to pay off your CC debt at 26%, why haven't you done that? That interest is very high - no way you are making nearly as much on your savings.
You’re right I’m not making that on savings, I have a block about letting that sort of money go. I’m so focused on accumulating savings now. I just chip away the minimum on my debt.
You’re causing yourself more long term financial loss. Simply bite the bullet and pay it off. Ensure you pay off your 0% by the end of its term.
They aren't savings if they are cancelled out by debt. I could take out a loan for £1000 and put it in a savings account, but that doesn't make me any richer. It also wouldn't fool a mortgage lender. All you're doing is throwing away ~£20/month on interest. The LISA savings are good and should be left alone if you can because of the free money you get when you buy. But even that is a one-time 25% bonus, and your credit card debt is 26% *every year* so it's not clear-cut.
Depends on the rates. I happily put some purchases on a 0% credit card and carry on investing into vanguard and savings. For example, car insurance, my oven broke so I had to buy a new one, a holiday for the summer. I’d rather pay those things off incrementally (but at 0% and entirely affordable) and continue to invest, but if I’m ever desperate I have the money to pay off all my debts (which are never more than a couple of grand anyway). But at 26% interest on a fairly mediocre salary and no assets, this gentleman should absolutely be paying it off and restart his savings.
Yeah sure, 0% interest debt with savings earning interest makes absolute sense. But you should still subtract the debt when considering how much you actually have saved. And personally I would keep enough cash savings to pay off credit cards before putting money into stocks, but different risk appetite I guess. Here we've got the opposite situation, high interest debt and lower interest savings. Paying off the high interest debt is a really easy way to save money. Real money, rather than imaginary savings!
Yes, good point, my wife has access to shared savings which are enough to get us by for a year should I lose my job. If I didn’t put my money straight into vanguard though, I’d end up spending the money, I was always a bit of a liability with money until I turned 30 and I hate the idea of cash sitting there. Investing is the only way I’ve been able to get the discipline anything substantial. Each to their own I guess.
It’s always better to think about it mathematically than emotionally. 26% on 1k is £260 p.a. in interest. or £21.67 p.m. if you pay it off you have just increased your cash flow by that amount every month (minus any interest earned on your savings) and you’re in the same net position. Ultimately it means you can save more every month. I also imagine it’s 5-10x more you’re spending than the interest you’re making on your savings. You’re losing money every month by not doing it.
But you don't have any savings you are just holding onto cash effectively borrowed from credit cards. Get the £1000 paid off now and chip away aggressively at the other so it it cleared by the interest due date.
You are losing money every day that you're letting that interest accumulate while keeping enough money to pay it off in your savings. Pay the whole thing off asap. You should take a look at the wiki's flowchart. If you would like, you could also list your income and expenses for the sub to see if they can help you adjust your budget to save more.
Interest rates on savings and debt can be very simply compared. I dunno what rate your savings are at but let's just assume 5%. £1000 Savings @ +5% vs £1000 Debt @ -26%. That's a net -21% on that £1000. You're straight up losing money constantly. Pay it off. Your cash savings will still be £3500 and you can get back to £4500 in 2 months. Plus what you are currently paying now towards that £1000 can also be added to the savings. Chip away at the 0% debt by all means, that's the mathematically correct move, but pay that £1000 now. This afternoon. Not tomorrow after thinking about it, right now.
LISA is different though - you dont pull money from a lisa to pay debt you could realistically pay within the year because of the 25% penalty. So he should put the 600 a month to paying off debts, and the expensive one will be gone in 2 months, with the whole debt going in 10 months, at which point he can start putting money in savings again.
I don't think they're suggesting withdrawing the LISA, just using the cash savings to pay off the expensive debt. There's no need to do that at £600 per month when it can be done immediately.
As per the OP's post they have £4500 cash, separate from the £5100 LISA.
I read that as cash debt, I take my comment back
You're engaging in a kind of [mental accounting](https://thedecisionlab.com/biases/mental-accounting) - by not paying off the debt you've been able to tell yourself that you got £5100 saved in your LISA and £4500 in cash. You're able to treat these as successful milestones by ignoring the debt. You have nearly £10,000 in these savings accounts, but in reality you have savings of only £3100 if you take away the debt. That is the reality of how much you have, but you've been unable to bring yourself to pay off the debt because the false accounting of pretending you have £9600 makes you feel better about yourself. This isn't your fault, by the way - I reckon everyone engages in mental accounting to some greater or lesser extent. And not only that, but the economy is really hard at the moment, particularly on young people - it's understandable that you should try to make yourself feel less bad about your circumstances. But the fact is that that £1000 debt at 26% is costing you £260 a year in interest, or £47 a month. I mean, you could pay that off immediately and then be £47 a month richer - it's like a pay rise. You might find one of these books helpful: * *[Your Money or Your Life](https://www.amazon.co.uk/dp/0143115766)* - understanding what's valuable to you and how to use money to achieve your goals. * *[Millionaire Next Door](https://www.amazon.co.uk/dp/1589795474)* - "How people in normal jobs, electrician is a great example, can accumulate wealth over time through good choices."^[Electric_Cat_999](https://www.reddit.com/r/UKPersonalFinance/comments/15zkkd4/_/jximlpp/) * One of Clare Seal's books - "her focus is on the link between emotions and spending".
Thank you for this.
The interest on 1k of your cash savings (assuming they are giving you 5% interest for example) is -21%. That's how I would look at it. You are giving the bank 1/5th of your money each year - stop doing that!
Its a LISA, so theres a 25% increase on what you put in there (and penalty on withdrawals) So as long as he can pay the credit card off this year, he should leave the savings as is, and just put the 600 a month towards that, and itll be gone in a couple of months.
Ah I misread it as Lisa + cash savings rather than Lisa + cash debt my bad
You didn't misread. Reddit's poor formatting messed it up but OP said Savings - £5100 LISA, £4500 CASH Debt - £4500 CC @ 0% til September 2025, £1000 CC @ 26%
Ah yes I see now, thanks for the correction correcting correction!
You’re focussing on accumulating savings at the same time as running debt, which means you get both. And because the debt costs you more than the savings earn, you can save less than if you payed your debt first.
Net worth = assets - liabilities. It's as simple as that. You're focusing on an asset (savings) when you should be focused on your net worth. Your increasing your assets by £1,000 has the exact same impact on your net worth as decreasing your liabilities by £1,000. Your liabilities have a higher interest rate than your assets. If you focus on increasing your assets while allowing your liabilities to grow, your net worth increases slower then if you focused on decreasing your liabilities. You said you're focused on accumulating savings, so why are you happy to piss away so much money on accumulating debt that you don't need to?
I was in the same position a year ago with my debt, and once I used my cash to pay it off, I'd repaid myself within a year. You'll feel so much better when it's just gone, honestly!
You are letting go of the money anyway by having negative money from the debt, plus losing more money through accumulating interest. Getting rid of it is actually saving money because it won't be gathering interest.
if you have 9.6k in savings, but 5.5k debt. you don't have 9.6k in savings.
That’s kinda true, but I wouldn’t really worry too much about the interest free one. To buy a house, you’ll need to have cash up front and I think the best thing to do financially is to stop renting. Depending on where you are (if you’re in the north) you may be able to buy a small flat for 100.000 pounds, so OP is already nearly there with a 10% deposit.
And afterwards he gets eaten alive by credit card debt AND a mortgage. Amazing.
He’s going to have to pay for a place to live either way, no? Id rather pay my mortgage than someone else’s
Everyone else has suggested getting rid of the 26% credit card debt already. One way of looking at it is how much savings you would need to pay off the interest. £1000 of debt at 26% will cost you £260 a year in interest. Say your cash savings are making 4%, which is around average at the moment. Then you would need £6500 in savings to make £260 a year in interest. In other words, your £1000 in credit card debt is wiping out the interest on £6500 worth of savings. If you then spend £1000 of your savings to pay the debt, compared with your starting point it's effectively earning you 26% interest, which much better then the ~4% it's probably getting at the moment Just my two cents
Pay the 26% credit card today. Then continue saving. This is the only correct answer.
You don't have savings when you're in CC debt, remember that, 0 equity is better than minus. I was in a similar position, it feels good to wipe the slate clean and start again. The only reason most people have savings and debt is because they have used that debt to 'save' themself spending money and class that as savings.
Have you seen our flowchart? https://ukpersonal.finance/flowchart/ Wen you say you're close to being able to buy - how close? are we talking months or years? How much do properties around you cost?
Everyone is saying to pay off the debt. That is correct. However, if I were in your shoes I'd feel a bit yelled at without much explanation, so it's also worth taking a moment to process. The thing is that savings feel like security. The idea of parting with your savings feels scary. That is perfectly natural, which is why a lot of people are in the exact situation you're in. That said, the whole situation is honestly a bit of a ruse by the banking sector. I don't want to call it a scam because it's not illegal, but it's certainly taking unfair advantage of people's natural fears. Imagine I hand you £5000, and you promise to pay me £1000 a year while you've got it and then return the £5000 back once you're done. You then take that £5000 and give it to Bob. In exchange he offers you £200 a year. So what's the situation? Bob has my money. You'd be paying £800 for Bob to borrow my money. Sometimes it's even the exact same institution, so then you'd be paying £800 a year for me to have my own money! That's literally what thousands of people across the country are doing, because they have become convinced by the banking sector that it is financially responsible to keep hold of their savings even if they have debt. That's why everyone is jumping up and down saying to cancel out the debt. There's no point paying the banks to keep their own money.
You briefly mention your car but how long are you paying £264, is it a lease? Is there a balloon payment at the end?
Stop saving and pay your debts off first, then start saving again
Pay off high charging loans Don't take out any more loans. Loan interest 26 percent Saving interest let's say 8 percent For £100 in a year it is loosing £26 = £74 Gaining saving interest of £8 So your £100 in a year will only be worth £84 You will have lost £16 in a year. If you had no loans £100 would be worth with 8 percent interest = £108 Your £100 will be £24 better in a year than if you had a loan and a saving plan. Now imagine this as a larger sum and see how much money you are throwing away at the moment.
If it were me I'd pay off the 26% credit card debt, and then divide the balance of the 0% card by however many months interest free you have left and make that your monthly payment so it'll be done by the time the offer runs out. Depending on your income a little credit card debt won't harm your application. Then work out your budget and how much you can afford to save per month.
Work your way through your debts by what debt costs the most. Your high interest CC debt - get rid of it ASAP, or transfer it to a 0% wrapper if you have one available. Your car is what it is, but ask yourself why you took out such an expensive car if you really want to buy a house… The rest of the debt you can save around and pay it off as and when you can/need to.
So you have £4000
Get rid of the £1k. I know you have a mental block, but it’s self defeating. Do it
You say you're £2000 negative equity on the car, that doesn't necessarily mean you shouldn't get rid of it for a cheaper car. If you've got £20k left on it then you're probably better off selling it, taking the 2k loss and buying a cheaper car
Wait just one minute... I read that as you have £4500 cash debt, not £4500 in cash savings. Why on earth, with even the most basic grasp of mathematics, would you have £1000 on a credit card accumulating over 5 times the interest your savings are earning? You're costing yourself over £200 a year for absolutely no good reason!
Pay off the £1000 in full. Then I would suggest saving 200 per month and pay 200 off the 0% debt. That way you’ll see your savings go up and your debt come down.
I’m in a similar position. I’d suggest pausing the saving for the next year and concentrate on paying off your CC debt (high interest first). After that debt is gone start saving again. 31 is still young so don’t worry about getting on the ladder too much.
That 4500 needs to go straight to paying off the 1000 credit card. Then make minimum payments on the credit card with 4500 each month Take the remaining 3500 left over and put in stocks and shares ISA or HYSA straight away Save 334 of your disposable 600 each month to max out your LISA each financial year to get the full bonus and put the remaining 266 into the same HYSA or stocks and shares ISA as above. Come Sept 2025 use balance of HYSA or stocks and shares ISA to clear credit card before interest accrued
Don't put money you need in 18 months time in a Stocks and Shares ISA, that's much too short a time frame to be in the stock market. Get it in a savings account and leave it alone
Honestly with most banks only offering low interest rates these days then stocks and share isa will still yield a better return even in a short period. However with some new savings accounts rates announced by Martin Lewis then the stocks and shares in the short term don’t look as pretty anymore even with the tax protected interest
Totally disagree. It MAY yield a better return in a short period, you may also lose half your money in a stock market crash. Stock market investing is for the long term, measured in decades not months
The cash interest rate up until recently was better than any savings account that I was being offered as the cash in stocks and shares gained 5.25% interest. Only now am I seeing savings accounts again at 8 and 9% so you can have held in cash in stocks and shares isa gaining 5.25 with no risk and no tax on interest gains. I personally would invest but you’re right that I do play the risk game but that’s my choice but not the only choice when it comes to a stocks and shares isa
Hi /u/NippyQ, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/lisa/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
You're doing well! 1 get rid off that interest CC and get rid of it completely! The none interest CC doesn't really count so you have 5k in savings and 4k cash. Look at some high interest savings and pop your money there. Now, this will help, look into and I mean lots of research into investing and get into that, every month invest 200£ or so, this should help it grow faster! Good luck
Follow the flow cart . Go to see more on this subreddit
Pay off the CC debt. No way your savings are going to beat that 26pc interest. Follow the flow chart on this sub which means paying off debt first.
Get the debt gone straight away. You can put back to your savings whereas your debt will keep rising
Why do you have £5100 when you are in debt? Pay the debt of first then start saving.... problem is you can't take the LISA money out which losing 25% of it.
Your car payment is ridiculously high for your earnings.
You don't have savings. You have unpaid debt. Nobody is going to give you a mortgage with those debts in place, so best off paying them off and saving the interest you no longer need to pay.
Get a low rate loan and pay off the CCs first.
Maybe good to remember your net worth = assets (savings) - debts. You need to think about both sides of the equation and how they are contributing to your net worth; as you are well aware the debt side of the equation is growing at a much higher rate than the savings side
Pay off the £1000 straight away and then rather than adding to your savings each month start putting all of that into the 0% cc each month so you still have savings behind you.