Should I transfer personal loan to credit card before applying for mortgage?

Southerner3000

Hi,

I will be applying to remortgage in April with my partner and currently have 2.5k outstanding on a Zopa loan which was used to finance a car purchase.

I cleared my £800 overdraft with the MBNA platinum card which will be paid off before we apply for the mortgage but was wondering would it be beneficial to pay off the car loan with a money transfer?

Would mortgage lenders look more favourably at the debt if it was on a credit card? I will save approximately £80 on the loan in interest by doing this but will have to pay the fee so either way I will not be losing out.

Thanks

Thrugelmir

Lenders will see that that you are merely juggling your debts, i.e. converting overdraft to a credit card. You'd be better off finding savings from your expenditure to actually reduce your overall level of debt owing.

If you've got money (savings) to apply for a mortgage. Then use it to sort out your personal finances as a priority. Don't treat savings and debt as sitting into different pots. As they don't.

jamesd

The overdraft was a bigger deal than a loan would be. Overdrafts are seen as signs of poor money management, loans aren't. Don't apply for new credit anywhere just before applying for a mortgage. If you want to do something about the loan, do it after you've moved in, not between acceptance and completion because followup checks can be done between those two times.

Loans and credit cards are just an affordability calculation issue.

To give an example, I had outstanding credit card balances of about 60% of the amount of mortgage borrowing that I wanted and was accepted by one of the fussiest lenders around for an interest only mortgage. Income multiple wasn't much above one, LTV was 75%, affordability was easy and they said that they would be happy for me to borrow the same amount again from another lender if I had reason to do that - which I may have had at the time, it's why I discussed it with them. I had the credit card borrowing for stoozing and was able to declare that I had made an estimated profit of more than £9,000 on the borrowing over the previous year, as well as showing capability to repay all the unsecured borrowing and still meet deposit requirements if they wanted me to.

That's a pretty extreme example, far from the edges of affordability limits. The closer you get to those limits and the higher the LTV the more likely it is that borrowing will be an issue.