Classic Question: Pay Off Debt v Balance Transfer

omariqy

Hi all,

I am sure this question has been asked plenty of times before but I have £3k of credit card debt. I've saved up a pretty sizeable deposit. However, my plan was to move the £3k over to balance transfer for 18 months and pay it off via standing order.

I am planning on applying for a mortgage in the next 3 to 6 months and I was wondering whether it would be better in terms of credit rating to just pay it off or instead have a regular payment plan in place?

Thanks

Omar

MallyGirl

it would generally be Direct Debit not Standing order. If you can get a low fee 0% balance transfer card from a different provider to your current credit card then you could hold on to your cash for a bit and make it work for you. Regular payments do make you look a better bet but the debt would be taken into account in the affordability calculations. No easy answer really - just the classic 'it depends on your circumstances'

Tixy

Will the £3k extra towards your deposit make a significant difference to your mortgage LTV? as in bring it in to a lower % band that means you are likely to find a cheaper mortgage?

Are you borrowing at the top of your affordability for the mortgage based on your income? in which case will having an outstanding debt affect the amount you can borrow?

omariqy

If I go down the buy to let investment route then I need most of the deposit but affordability wise I will be more than fine. I guess I have answered my own question!