Loan to consolodate credit card debt

Jamesie1

Hi all,

I am after a little advice, I am contemplating refinancing a personal loan with my bank to pay off about £5k of credit card debt over a number of cards.

I have been approved for the loan, however as a stipulation they want me to close the card accounts, I understand why they want me to do this however, that will not look great on my credit rating.

I have no issue with them paying the lenders however what can they do to force me to close the accounts after they have been paid? I would close two of the cards but I am looking to get a mortgage in a year or two and closing all lines of credit will have a negative impact on my scoring.

How does this work and can anyone advise if they have been in a similair situation and how did they force you to close them?

Thanks

James

mwddrwg

Hi James,


Never been forced to close them when I applied for my loan to consolidate but I kinda wish they had as the temptation to use them again has been too much. I know that you're in a different boat as you're applying for a mortgage etc, but I would still advise anyone to close the things down straight away to remove temptation.


Hope that helps a little

Tixy

They can force you to close any account from the same bank (as in they can close it themselves).

But they don't have any mechanism to force you to close accounts with other lenders.

How many cards do you have that they would like you to close?

That said I am not convinced that closing your current credit cards now will have an impact on getting a mortgage in a couple of years time. As you will still have an active credit history in the form of the loan.

But you could simply advise them you intend to keep one card open for the additional purchase protection it provides.

Are you certain a personal loan is the best option for you - what APR have the offered? Given the relatively low level of debt have you considered trying to move the balances to a 0% balance transfer credit card instead?

TadleyBaggie

Very sensible of them. Otherwise you could just run up the credit card debt again ( many people do) and you would have twice the debt.

Jamesie1

Thanks for the advice all so far.

I can see why they want me to close it all. I have 4 cards currently the biggest with a £3k current balance which although is on 0% currently it ends soon. I am utilising a lot of my credit currently as we have recently bought a new car and booked a family holiday so am struggling to get another 0% card that will cover the outstanding amounts.

The Loan offered is a good 4.9% over 4 years, it would free up a considerable amount of cash on a monthly basis that why I am tempted.

I should say none of the cards are with my bank and I would want to close 3 cards keeping one of the lower limits for emergencies and to keep a line of credit open perhaps just buying petrol or something on it and paying it in full each month.

The cards are have arent a struggle to pay each month but its always nice to free up some cash and perhaps just lump it all in to one pot.

Tixy

So the debt won't be paid off by the time you will be applying for a mortgage?
Remember that a mortgage lender will factor any debts/commitments in to their affordability calculations, so it can often makes sense to pay off your debts first even if that means a slightly smaller deposit.

Jamesie1

Tixy wrote: »

So the debt won't be paid off by the time you will be applying for a mortgage?
Remember that a mortgage lender will factor any debts/commitments in to their affordability calculations, so it can often makes sense to pay off your debts first even if that means a slightly smaller deposit.

Hi I guess not quite might be just a year shy, I do earn commision in my current role and I was hoping to make a few overpayments on the loan which I am told I can do so hopefully can shift it sooner.

DCFC79

Forget about your credit rating as it means nothing.

Nasqueron

Might do better paying off the highest interest rate card (or top 2), closing it, waiting a bit and then trying for a 0% card - though if you're not clearing in full every month then you may have more of a limited number of choices for a BT. If you're getting to the end of a BT period and suddenly the interest is going to shoot up and you're worrying about clearing it then perhaps focus on the debts rather than buying holidays

Jamesie1

Nasqueron wrote: »

Might do better paying off the highest interest rate card (or top 2), closing it, waiting a bit and then trying for a 0% card - though if you're not clearing in full every month then you may have more of a limited number of choices for a BT. If you're getting to the end of a BT period and suddenly the interest is going to shoot up and you're worrying about clearing it then perhaps focus on the debts rather than buying holidays

What a stupid comment to make, firstly not clearing in full if I was I wouldn't need a bt card?? Read the post again, yes I can't get the bt card I want but the loan is at a good rate and would pool it and save me money on a monthly basis. I'm not in some spiral of debt as I stated in my first post I am asking if I have to close my credit cards or if I can leave them open to keep a good credit line. Why is there always one on every forum that thinks they need to make silly comments. I always try and be objective not patronising. Thank you to all that have brought sensible comments to the table, keep up the good work..

Pixie5740

Closing the credit card accounts won't necessarily have a negative impact on your credit file, quite the opposite in fact. Having lots of available credit (unused cc limits) can be a negative factor so in the long run getting shot of them is probably a good thing. You'll be make regular payments in full and on time to the loan showing mortgage lenders that you are capable of borrowing money and paying it back.