Debt Free Plan: the debts

As you might have read in this post we are starting to pave the way to becoming debt free and to own our own property.

First things first – the debts.

We currently have:

  • ~ £7800 for a personal loan (furniture for our first flat)
  • ~ £600 in credit card debt

We already cleared £550 of overdraft debt and we both have student loans, but it is not really worth repaying those early in the UK system (they come off your wage before tax in a really reasonable rate).

Our total amount of debt might not seem huge compared to some people, but for a couple in their early 20s it can feel like a massive weight on our shoulders, especially because we are both studying and I don’t work full-time.

Like a lot of budgeting tips say we are going to tackle our smaller debts first. Christmas is coming and a lot of our budget is already geared towards that (my family is coming to visit from abroad) so the plan is to completely clear credit card debts in January.

After that we will be tackling our loan. Our normal loan repayments are £221 a month but with a 19% interest rate we have hardly put a dent on it. Starting in February we will be paying £821 a month towards the loan. According to the loan overpayment calculator we would be finish with our loan in September 2017. That is 3 and half years early and it will save us £3000 in interest! How insane is that?!

It will literally take us 9 months to become free of debt which is insane considering how much we could have saved by now!

(It is also worth noting that our wages are not above average, at all. Our annual household income is around £29k)

 

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