Mortgage App - Credit Card or Loan?

shell88

Hi,

I'm hoping to apply for a mortgage with my partner at the end of this year. I'm currently paying off my existing debt and was just wondering what would look better on my credit file when applying.

I have an outstanding bank loan, with £4,700 left and a credit card with an outstanding balance of £800 (£1000 limit). I am due a bonus from of work of approx £1000, would it better to clear the credit card or reduce the outstanding loan?

Sorry if this is a bit vague, I guess i'm thinking out loud a bit!

Thanks

[Deleted User]

Whichever one is costing you the most.

banks4u

Depends what's your income ?

shell88

I earn £21k.

The loan is definitely costing more each month.

Thanks

Trying_to_be_good

It's the interest rate that's more relevant, rather than the monthly repayment - does the credit card or loan have the higher interest rate?

What was the purpose of the loan? If to pay off other debt it may be worth looking at your spending patterns to ensure you have changed your behaviour since then and are now living within your income (with enough to cover the costs of owning your home).

kirtsypoos

Will paying extra off the loan reduce the term or the monthly payment?

I was advised that loans are taken at the cost of the monthly payment which doesn't change, rather than the overall amount remaining, however credit cards are taken at 5% of the outstanding balance per month, so if reducing the loan won't reduce the monthly payment, you will still be assessed on both the monthly loan cost and the 5% credit card balance.

Hopefully that makes sense?