Use capital to pay debt to get access to lower rates?

robjl

Hi All

Look out newbie alert!

I have a dilema which I could do with some advice on, currently I owe as below:

£8200 Natwest Personal Loan
£8000 Barclaycard
£1400 Ikano (0% Deal)
£400 Ikano (0% Deal)
£1100 Regular Overdraft
£800 Natwest CC (Paid in full each month)

so £19900k give or take

I have just applied for a Sainsbury's loan for £15k in order to consolidate Natwest and Barclaycard (I know not quite enough but I can comfortably cover the remainder) however I have been rejected despite an excellent credit rating of 965. I suspect they are looking at the risk of me not settling, this would mean I have £34900 O/s, so I understand the reasons why,

The reason I needed the loan was twofold, firstly to lower the rate I am paying on both of these lending mechanisms thus reducing the overall outgoing, and secondly to further improve my credit rating by reducing my revloving credit in readiness for the next bit...

...Here is my dilema, I am also looking to get a mortgage in the next 3-6 months so I have £11K sitting in bonds at the moment ready for the deposit, should I use the £11k available to settle the Barclaycard but keep the card (just not using it), and partially settle the Natwest loan, once all this is washed through should I then lend the deposit required for the mortgage and the remainder of the Natwest loan (I will declare that is my intention to the mortgage company of course)

Point to note, I do not want to leave getting a mortgage much longer for fear of being priced out of the market, it would take me about another 12 months or so to resave £10k+

Any advice would be gratfully recieved,

Regards

Rob

katejo

robjl wrote: »

Hi All

Look out newbie alert!

I have a dilema which I could do with some advice on, currently I owe as below:

£8200 Natwest Personal Loan
£8000 Barclaycard
£1400 Ikano (0% Deal)
£400 Ikano (0% Deal)
£1100 Regular Overdraft
£800 Natwest CC (Paid in full each month)

so £19900k give or take

I have just applied for a Sainsbury's loan for £15k in order to consolidate Natwest and Barclaycard (I know not quite enough but I can comfortably cover the remainder) however I have been rejected despite an excellent credit rating of 965. I suspect they are looking at the risk of me not settling, this would mean I have £34900 O/s, so I understand the reasons why,

The reason I needed the loan was twofold, firstly to lower the rate I am paying on both of these lending mechanisms thus reducing the overall outgoing, and secondly to further improve my credit rating by reducing my revloving credit in readiness for the next bit...

...Here is my dilema, I am also looking to get a mortgage in the next 3-6 months so I have £11K sitting in bonds at the moment ready for the deposit, should I use the £11k available to settle the Barclaycard but keep the card (just not using it), and partially settle the Natwest loan, once all this is washed through should I then lend the deposit required for the mortgage and the remainder of the Natwest loan (I will declare that is my intention to the mortgage company of course)

Point to note, I do not want to leave getting a mortgage much longer for fear of being priced out of the market, it would take me about another 12 months or so to resave £10k+

Any advice would be gratfully recieved,

Regards

Rob

But you don't really own that 11K do you because you have 19900 outstanding debt? If you really can save 10K in a year then it won't take you all that long to save it up again. I could not dream of buying a new house if I had outstanding debt other than my current mortgage.

robjl

katejo wrote: »

But you don't really own that 11K do you because you have 19900 outstanding debt? If you really can save 10K in a year then it won't take you all that long to save it up again. I could not dream of buying a new house if I had outstanding debt other than my current mortgage.

You are right I dont own that £11k, but it is still currently available to be used as deposit for the mortgage, the choice is at the moment to continue renting at a cost of £10200 per annum - dead money, or getting on the ladder and only paying £7800 per annum but into an appreciating asset, the fact I am looking to go further into debt is not in question, the advice I am looking for is which way round to do it.

CLAPTON

the mortgage company will take your debts into consideration when assessing their mortgage offer

try their online mortgage calculator

Mara_uk7

Id use the cash to pay off the Barclaycard, Ikano AND the overdraft. If you have a regular overdraft, this could be recalled by the bank at any time.
Perhaps posting a SOA would help people give you the right advice, without knowing your earnings & outgoings its very hard to give informed advice .

27col

The first flaw in your idea is that you cannot pay a mortgage deposit using a loan. If you can save the amount per year that you say you can, then why have you been unable to pay off your debts before now.
Incidentally, you would do well to learn the difference between lending and borrowing. If you get money from someone else then you are borrowing the money, not lending it.
Here's another thought, the best way to reduce your borrowing costs is to pay off what is owed as early as possible, and preferably not take on any new debt.

robjl

27col wrote: »

The first flaw in your idea is that you cannot pay a mortgage deposit using a loan. If you can save the amount per year that you say you can, then why have you been unable to pay off your debts before now.
Incidentally, you would do well to learn the difference between lending and borrowing. If you get money from someone else then you are borrowing the money, not lending it.
Here's another thought, the best way to reduce your borrowing costs is to pay off what is owed as early as possible, and preferably not take on any new debt.

I have a new job, which now pays significantly more, but it does depend on bonuses, £10k is comfortable but I'm only just in this position, £11k has taken me 3 years on the previous package I was on, and was always intended to get me off the rental ladder, as said in a previous post I am paying over £10k per annum in dead money,

If I pay off everything ASAP as you suggest then I will have paid another years rent for nothing, and then I have at least another 6 months or so before I can get the required deposit together to buy,

robjl

Mara_uk7 wrote: »

Id use the cash to pay off the Barclaycard, Ikano AND the overdraft. If you have a regular overdraft, this could be recalled by the bank at any time.
Perhaps posting a SOA would help people give you the right advice, without knowing your earnings & outgoings its very hard to give informed advice .

Hi sorry stupid question but what's a SOA?

CLAPTON

what sort of mortgage amount do you want
what is your salary

Pixie5740

Firstly, that credit score from Experian, Equifax or Noddle is completely meaningless as none of them lend money.

Have you spoken with a mortgage broker to see how much you could potentially borrow with almost £20k of existing debt? That might help you decide if you want to use your £10k of savings to pay off your debts or not. Personally I would get everything paid off before buying a property. I know that renting seems like dead money but it's not, it pays for the roof over your head.

I also wouldn't borrow any more money in your shoes. Been there done the consolidation thing myself and it didn't work. Snowballing my debts was the way forward.

DCFC79

robjl wrote: »

Hi sorry stupid question but what's a SOA?

statement of affairs, its a list of your monethly spend eg food, insurance etc plus what you pay each month to your debts.