Save money or pay off debt?

[abby1234519]

We have about 30k (£) in interest free debt. I'm so "lucky" that it's interest free, the situation would be much worse if it was accruing interest!

We get about 2.6k a month in cash terms, both on the lower earnings scale however I stupidly have a lease car which I need to pay for the next 3 years, other wise our take home pay between us would be 3k. Once OH graduates university and gets a job we could be in a much better situation.

I currently have the ability to continue paying this debt off at a rate of about 1k a month (fluctuates) which will clear the debt in 3 years.

BUT.

When OH finishes university next April he wants to study for another year as an outdoor educational instructor. Basically this means the council will train him at their local centre (we live very close to a national park), he will stay there 5 days a week and receive £360 a month. For an ENTIRE year. We should receive government support so we're looking at a total income of 2.1k

We can manage on such a low income (just) but I wouldn't be able to overpay on debt. However we would be debt clear end of 2020 if we stick to the budget. Potentially quicker as I often make an extra £200 -£300 a month but that is an adhoc thing and not guaranteed.

Do I....

a) save rather than overpay debt now, i.e save money in preparation for the year where we have even less money.

b) continue to try to clear as much debt as possible, I think I can clear 15k by next April if we stick to my rather unforgiving budget.

[Playing with Fire UK]

For how long is the debt interest free? Is it a balance transfer or student loan debt or something else?

If a BT will you be able to pay it off before it starts charging (probably eye-watering) interest? Is your credit report shiny enough to retransfer the balance?

If it is UK student loan debt don't pay it off any sooner than you have to.

If something else, is it a line of credit that you will have access to reborrow from next year if you are short of funds.

What is the relationship between you and OH? I hear a tiny and distant alarm bell that you may be considering subsidising someone if you are not in a long term relationship.

Have you looked into the government support including your wages, or would you be living apart so not considered a couple from a benefits point of view (no judgement, but £2.1k a month seems a bit high to be getting benefits if there are no disabilities or children).

Finally, are you definitely locked into the car lease or would it be possible to get rid of it and buy a cheaper car?

[abby1234519]

Thank you for your response

11k of it is OH DMP so interest free till the end

8k is a loan from father so also interest free till the end

4k is a loan at 16.9% however am using savings to clear that next month

800 is a student grant overpayment that I am paying back interest free

The rest are all credit cards but a mix of 24 to 36 months and I just switch them around so anticipate interest free till the end of paying them off (as I would be clearing them  in the next year)
The cards I have are ones that offer new BT deals on a rolling basis so I clear one then swap it over if I need to.
Student loans don’t form part of the above as I view them as a “tax”

We’re married (whether happily is a debate for another time, although its probably just money pressures) with one child. We don’t receive govt support at the moment but would if he does the year long training as our income would be low enough
Definitely locked in to the car lease, it ends Feb 2020 and there are no get out clauses – I work with a legal assistant who has confirmed that the gap insurance only covers for sickness etc

[Playing with Fire UK]

Thanks for the comprehensive answers.

We can manage on such a low income (just) but I wouldn't be able to overpay on debt. However we would be debt clear end of 2020 if we stick to the budget. Potentially quicker as I often make an extra £200 -£300 a month but that is an adhoc thing and not guaranteed.

Assuming that the outdoor instructor thing is a done deal (have you considered OH delaying it for a year to try to get higher paid work without the qualification?), I would save a chunky emergency fund (or keep it if you already have one after paying off the high interest loan) and plough the rest into the debt repayment. Do OH's earnings after getting the qualification make it financially worthwhile in the long run?

Start living on the 'new' budget now so that you test that it is accurate and can make the most informed choice. Would there be additional costs for the training year that you don't pay now (childcare, travel?)? Your e-fund should be for unforeseen issues (time between jobs, major appliance breakdown) rather than supplementing day to day living IMO. If you couldn't afford to live during the outdoors course then now probably isn't the right time to do it.

It's a shame about the car lease, but never mind. I'm in total agreement about the student loans - I'd be gutted if I paid them off early and then something terrible happened and I couldn't work again. Or even if I paid them off and then got to the age that they'd be written off and realised that I'd given the government extra tax for no reason!

I'm sure you know this because you seem totally on top of things, but make absolutely sure the minimum payments are going through on the cards. I had an issue where the direct debit for a new card failed, the Financial Ombudsman intervened and told the new card company that it was their fault and they needed to sort it out but loads of my credit limits were reduced before I even knew there was a problem and it was a nightmare getting them back. This was over a year ago and my credit score is still ~200 points lower than it used to be.