What's the cheapest & best way to pay off a debt ?.

Would it be churlish to point out that taking out a loan is not "paying off debt"?

Borrowing from Peter to pay off a debt to Paul isn't paying off debt, it's just shifting it around. That said, given a limited income stream from which to pay loan interest *and* reduce the loan balance, the best way to proceed is usually to maximise the money available for paying down the principal by minimising the money needed to fund interest payments, so what you should do is "shift it around" to the lowest possible interest rate, and that usually means to a mortgage.

This doesn't mean you have to remortgage. If you have a decently competitive mortgage already, it may be possible just to increase its balance (take out a "further advance").

Then use it to pay off the high-cost debt, and see what the monthly payments do. Don't be tempted to start spending the income freed up by them going down. Make them go up again to what you can afford, to make the debt shrink faster.

Generally, protecting your house (and not attaching more debt to it) and prioritising the mortgage is the best thing to do.

There is an excellent forum for debt issues here - - TMF dealing With Debt board.

Many of the people have been there, done that, & got the T-shirt, so the advice is from people who have a detailed knowledge of the subject. Post on there - they'll know.

Good walk through exercise here

More links on my webpage

Best of luck

Daytona

"Daytona" wrote

But not attaching more debt to the house -- ie using unsecured debt instead of secured debt -- is highly unlikely to be the "cheapest" way, is it? So how could it possibly be "cheapest & best"?

Maybe not the cheapest in terms of APR, but don't forget that the term of your mortgage (i.e. 15, 20, maybe even 25 years) is highly likely to be longer than the term of the loan you're paying off. So you may only be paying 6% apr instead of 8% but as it's going to be paid off over 25 years instead of 2, you'll be paying that annual interest more times over and may actually end up paying a lot more money in total. Depends on your circumstances really, and how flexible your mortgage is.