Loan to pay off Credit Cards?

Wildthing1784693

Hello

I currently have three credit cards - total balance around £5000, and a littlewoods account which has a balance of around £1500.

I was looking into potentially taking out a bank loan to pay off the above, would this be a more favourable option than having various credit cards and a littlewoods account on my credit history?

I am looking to apply for a joint mortgage later this year with my fiance.

At the moment, my outgoings on the above is around £220 per month. If I were to take a loan via my bank (if accepted on the terms advertised on their website), I could take out a loan to pay off all of the above, at a fixed interest rate of 4.7% P/A. Over 5 years, my monthly repayments would be £130.00.

To me this sounds like I will have less going out monthly, plus also be reducing the interest being charged on the outstanding amounts as the credit cards have much higher interest rates.

But I am afraid I might be missing something here.

Can anyone advise me on their thoughts on what would be the best idea here?

Thank you in advance!

DCFC79

Can you be sure you will get the 4.7%, have you asked the bank already ?

Wildthing1784693

Hello,

They have said based on the information I have given them that this is likely what I would get, however I would need to apply to find out the exact deal I would be offered.

Thanks

londonTiger

It depends on your means, for high earners £6500 credit card balance is typical. I assume for you it's a sizable percentage of your annual income.

Can't comment on what mortgage lenders would prefer. What I would say is get rid of all the luxuries, get on eBay selling your unwanted stuff to pay off the debt asap. Credit card is regarded as a short term debt, so repayments are flexible so you won't be penalised for paying back too early.

andyfromotley

i suspect its swings and roundabouts to most lenders. You have the same amount of debt whatever its on. They will be much more interested in how you have managed those accounts. I would suggest a 0% BT card would be the cheapest way of relating this debt.

londonTiger

andyfromotley wrote: »

i suspect its swings and roundabouts to most lenders. You have the same amount of debt whatever its on. They will be much more interested in how you have managed those accounts. I would suggest a 0% BT card would be the cheapest way of relating this debt.

yeah, if you can get a 0% BT deal go for it. But I reckon OP is going to struggle. Credit limits are based on income & current credit - given that OP has a few credit cards they may decline or issue one with a measly credit limit.

I used to get credit cards with 5K to 7.5K limits, had a few defaults recently and the new CC came through with a 3K limit. Plus I have 3 credit card with balances (2 personal, 1 business) and the 4th one I applied for to do a BT came with the 3K limit.

Simon11

If you have savings for your joint mortgage, then why aren't you using this to pay off your debts? Savings aren't savings if they are financed by debt.

Tixy

From a mortgage lenders point of view then if you are going to have unpaid unsecured debt then a fixed term loan is likely to be preferable to a revolving credit facility.

But if you can afford the £220 a month you are currently paying (is this just the minimum payments?) then I'd consider taking the loan over a shorter period than 5 years.

Or as suggested possibly repaying from your savings, although also taking in to account the level and % of deposit you have.