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bob monkhouse

Debt: Clear It, Or Wait?

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Okay, Ive got about 8k remaining on credit cards. Been paying down £650 a month, which leaves me with nowt afterwards. All the cards are switched onto interest free for a year. Should I

a. Continue paying down, be debt free in 1 year. (minus some student loan).

b. Pay the minimum, and save the money towards a house deposit or ISA/Stock investment

I cant decide whether we are facing infltaion in the near future or not.

What would the great and the wise of the HPC do?

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Okay, Ive got about 8k remaining on credit cards. Been paying down £650 a month, which leaves me with nowt afterwards. All the cards are switched onto interest free for a year. Should I

a. Continue paying down, be debt free in 1 year. (minus some student loan).

b. Pay the minimum, and save the money towards a house deposit or ISA/Stock investment

I cant decide whether we are facing infltaion in the near future or not.

What would the great and the wise of the HPC do?

Pay it off while you can.

That 1 year of interest free will soon enough be over, and any interest you made in a savings account would be wiped out very quickly.

Or, you could repackage and securitize your debt and sell it on with an accompanying default insurance policy...er...

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generally

1. Debt generally has a higher interest rate

2. Savings are taxed

Normally this means that saving whilst you have a debt is crazy, but for some reason in a weird interest free land, so the rules don't really matter for 1 year.

do what's cheaper, and what will help you to be debt free sooner. In theory if this is really Interest Free debt (with no transfer fee) it is cheaper to save separately to pay the debt down in bulk. However saving for a deposit or something is pointless when you have a debt. Paying down the debt will be liberating, saving when you have debt is pointless because the savings are meaningless...

Edited by moosetea

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Your predicament has bought something into illumintation that I hadnt realised before.

Both teh heavily indebted and the cash rich have the excactly the same worries! Inflation or deflation.

Obviously they both desire opposite outcomes, but their futures are decded by the big inf/def swingometer.

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Your predicament has bought something into illumintation that I hadnt realised before.

Both teh heavily indebted and the cash rich have the excactly the same worries! Inflation or deflation.

Obviously they both desire opposite outcomes, but their futures are decded by the big inf/def swingometer.

Indeed squire, indeed.

And so it go's.

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generally

1. Debt generally has a higher interest rate

2. Savings are taxed

Normally this means that saving whilst you have a debt is crazy, but for some reason in a weird interest free land, so the rules don't really matter for 1 year.

do what's cheaper, and what will help you to be debt free sooner. In theory if this is really Interest Free debt (with no transfer fee) it is cheaper to save separately to pay the debt down in bulk. However saving for a deposit or something is pointless when you have a debt. Paying down the debt will be liberating, saving when you have debt is pointless because the savings are meaningless...

Thanks for the advice Moosey. As it happens, I remember when you bought your house - how is that working out?

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Clear it.

Clear it.

Clear it.

I know, I know.

There's just a stupid little part of me that thinks "stocks are cheap, invest now before you miss the boat". As someone who has spent 5 years here, I really should know better.

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Or- if the credit card agreement pre-dates April 07, you could ask for a copy of the CCA agreement to establish whether it is properly executed ergo enforceable. If it isnt, you should at minimum get your interest back, or at most the debt written off

Check out the http://www.consumeractiongroup.co.uk/forum...agreements.html

Erm, that was ont' wireless again today: they've been required to withdraw the scam adverts from newspapers (and presumably other places where the ASA is mandated to take an interest).

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I know, I know.

There's just a stupid little part of me that thinks "stocks are cheap, invest now before you miss the boat". As someone who has spent 5 years here, I really should know better.

It's a fair gamble. I wouldn't invest on the stockmarket with borrowed money[1], but then I'm a natural coward and wouldn't take on creditcard debt in the first place. You evidently differ: are you a big gambler?

[1] Except where the known tax saving substantially exceeds the total cost, so the game is one with a clear positive bias.

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Erm, that was ont' wireless again today: they've been required to withdraw the scam adverts from newspapers (and presumably other places where the ASA is mandated to take an interest).

Not sure how these 'we can wipe your debts' companies are operating. Reality is if your credit card company has shredded your application form you can more than likely tell them to sod off and find another tat junkie looking for dealer.

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There's just a stupid little part of me that thinks "stocks are cheap, invest now before you miss the boat".

and you don't think that about house prices ?

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Your predicament has bought something into illumintation that I hadnt realised before.

Both teh heavily indebted and the cash rich have the excactly the same worries! Inflation or deflation.

Obviously they both desire opposite outcomes, but their futures are decded by the big inf/def swingometer.

odd that, something that only affects money has an effect on debtors and creditors.

strangley, reality is little changed, in spite of the imaginary problems with an imaginary means of exchange.

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Okay, Ive got about 8k remaining on credit cards. Been paying down £650 a month, which leaves me with nowt afterwards. All the cards are switched onto interest free for a year. Should I

a. Continue paying down, be debt free in 1 year. (minus some student loan).

b. Pay the minimum, and save the money towards a house deposit or ISA/Stock investment

I cant decide whether we are facing infltaion in the near future or not.

What would the great and the wise of the HPC do?

You're a debtor - here have a <<<<HUGZ>>>>. They can't expect you to pay it back or you'd be broke and everything.

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Okay, Ive got about 8k remaining on credit cards. Been paying down £650 a month, which leaves me with nowt afterwards. All the cards are switched onto interest free for a year. Should I

a. Continue paying down, be debt free in 1 year. (minus some student loan).

b. Pay the minimum, and save the money towards a house deposit or ISA/Stock investment

I cant decide whether we are facing infltaion in the near future or not.

What would the great and the wise of the HPC do?

The scary bit is "Ive got about 8k remaining on credit cards" :blink:

How much did you have to begin with? :(

Pay it off! :rolleyes:

Playing the stock market with borrowed money is a mugs game (even for most hedge funds) ;)

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Was in a very similar position myself unitl a couple of weeks ago. In some probabaly misguided play aginst hyper inflation and/or debt jubilee I maxed out a few cards and put the money to one side. Cost a few hundrded quid in fees bnut all interest free.

Paid a few k off over the last year or so and a few weeks ago bit the bullet and paid of the final 6k in one.

The feeling of having no debt is quite decent, but there is still the nagging doubt that interest free cash on deposit may have been the right play - we shall see.....

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Was in a very similar position myself unitl a couple of weeks ago. In some probabaly misguided play aginst hyper inflation and/or debt jubilee I maxed out a few cards and put the money to one side. Cost a few hundrded quid in fees but all interest free.

Paid a few k off over the last year or so and a few weeks ago bit the bullet and paid of the final 6k in one.

The feeling of having no debt is quite decent, but there is still the nagging doubt that interest free cash on deposit may have been the right play - we shall see.....

It wasn't interest free though was it - the interest charges were front-loaded as admin charges. This is the self-deception of many who borrow against credit-cards - they forget the arrangement/transfer charges and falsely believe themselves to be getting a bargain.

By clearing this debt you did the right thing.

At the height of the credit bubble it was possible to arbitrage debts on credit-cards - for many of us this once-in-a-lifetime arbitrage option set alarm bells ringing. It had never previously been possible to borrow money in this manner and bank it and be better-off - and the simple maths of borrowing and lending told us it was entirely unsustainable - something those who created the magic pixie-dust of risk-free investment had forgotten!

A simple test for anyone who wants to know whether they're better off paying down debt or saving/investing. Subtract the interest of one from the other, add in the interest on taxed income and see which is higher. You will always find borrowing to be more expensive than paying down debt - it's called 'profit' this is how banks made money right up until the credit-bubble and the alchemy of CDOs.

The question should be: not will I be better off paying down debt - but is the interest-rate justified? Borrowing money can be beneficial (it may make your liquidity position stronger) provided the price is sensible.

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Thanks for the advice Moosey. As it happens, I remember when you bought your house - how is that working out?

Its working out well, I'm still up on the deal and saving at an even faster rate than before I owned. Unfortunately took a 5 year fixed rate deal as I expected an inflationary happy ending much sooner, but the fixed rate is less than I would pay if I took the same mortgage today. A couple more years and things I think things will be easier as I wont be saving as much.

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Guest Skinty

Debt is a liability because you don't know whether your circumstances will unexpectedly change over the course of the next year.

Debt also restricts your freedom.

If you have savings then you can immediately put it towards paying off debt, or you can use it for some other purpose (like emigrating, feeding yourself after having lost a job). But then you could dip back into the credit cards if worst came to the worst. Having savings is a risk as you don't know what's going to happen to the bank.

But savings will count against you if you need to claim Job Seeker's allowance.

Personally I'd clear the debt as soon as possible unless a specific opportunity came up.

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Debt is a liability because you don't know whether your circumstances will unexpectedly change over the course of the next year...

And this is the classic response of the MSE-numpties.

Debt is never a simple binary-oppostion true/false calculation - it depends entirely on individual circumstances, level of indebtedness, level of income, and type of debt.

A simple illustration:

Man has £100k mortgage over 25 years 5.5% fixed for 5 years. He moves heaven and earth to repay this debt and does so in seven years. His car breaks down and he needs a new car for work. He is refused loan because lenders have tightened their criteria. He loses his job. His roof needs repairing but he cannot get work done so goes to sub-prime lender and borrows £3000 who says he can repay from his DSS money, roof is repaired.

Debt grows to £10,000 sub-prime lender sues and gets charging order secured on property. Property is sold for current market rate of £80k. Man pockets £65k from sale of house. Cannot get social housing because he is deliberately homeless ends-up in rented accommodation praying for house prices to fall further.

All this for re-paying mortgage early.

It's not the debt - it's who it's with and the terms of the loan that matter.

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