Does a personal loan affect you getting a mortgage?

bryanferguson07

Hi folks, I'm looking at getting a personal loan to consolidate all my debt into one (£3000) - but I'm applying for a mortgage in 2-3 months.

What I need help with is:

1) will this affect me applying for a mortgage?

2) will the £3000 borrowed be a negative for potential banks looking at my credit report?

3) is this the best idea for me to continue with?

I would be paying the loan over 12 months and likely to pay it off early (is this also possible?)

Thanks for reading, any help would be appreciated!

weeowens

Hi, I think a lot will come down to whether the payback of the £3k stresses your ability to pay the mortgage ie will you pass the new affordability tests:
How to pass the new mortgage affordability tests


https://www.moneyadviceservice.org.uk/en/tools/house-buying/mortgage-affordability-calculator

Mortgage lenders to tighten affordability ratios

[Deleted User]

Yes you could pay it off early and no its never a good idea to take on new debt (even to replace old) in the months before applying for a mortgage.

bryanferguson07

Thanks for the link, we have done the affordability test and we are not at risk. Thanks for the help massively appreciate it!

markfj

I think, depending how good your credit rating is, the general advice is to not apply for finance before mortgages? That said its not a huge amount.

DCFC79

markfj wrote: »

I think, depending how good your credit rating is, the general advice is to not apply for finance before mortgages? That said its not a huge amount.

It's how good the credit history as lenders can't see the score.

pathtofreedom

It's not a good idea as the credit searches would show up on your file, if you don't get the loan, or even if you do, the searches might be miss interpreted as a failed mortgage application with a different bank. As the search won't say what it was for, just someone was looking into you.

Also you can't use a loan for part of your deposit, so you'd need to show if you got the loan that it wasn't used for that. So might be simpler to just save more deposit, or use your deposit savings instead of getting the loan - depending what you need the cash for, or just wait till after you've moved, but if you wait till afterwards you still might have the same problem and have the loan refused instead until they can see your finances are more stable again.

downhillfast

A £3k loan over 12 months is going to be a pretty expensive APR... IF you do decide to consolidate (not a good idea generally unless you really know you won't just wrack the debt back up) then you may be better off looking at a 0% money transfer credit card (MBNA or Virgin offer these) It will work out much cheaper as you won't be paying a high APR, just a one off (usually 1-2%) fee.

foxy-stoat

The best interest rate loan has a monthly repayment of £257 - if your going to repay early then just pay the most you can on your current debt.

You will achieve nothing by applying for a loan over 12 months and paying it back early - you may not even get offered the best rate. You will have a search on your credit history a few months before applying for a mortgage so not the best move.

I would concentrate trying to wiggle out of your BMW finance problem first while over paying your current debt before thinking about applying for a mortgage, or sell the other car you have just bought and raise the cash that way - why not use your saved deposit to clear your debts and start saving hard? Or wait until your claim for your fractured hand comes through.

Good luck

ReadingTim

You won't get a 100% mortgage - you will need a deposit as well.

If you have some savings for a deposit, why are you also in debt? I would use the deposit savings to repay the debt, rather than a loan.

But if you don't have a deposit and you also have debt, you ain't gonna be getting a mortgage!

foxy-stoat

https://forums.moneysavingexpert.com/discussion/5427828

Folk who replied on this thread thought the OP was a troll...