Clear loand or credit card?

Halfcat

Hi,
I have a 16K loan, with 5 years or so remaining at 3%.
I also have about the same on credit card (5 of), mostly on 0% transfers that I pay off at a fixed amount a bit above minimum, about £400 a month. I have good credit card rating for 999 for what thats worth, but low affordability . I am lucky that I always get offered decent 0% balance transfer offers, paying 1-5 to 3% of course.
I also have 2 credit cards that pay cashback that I pay off each month,; work expenses mostly and will keep those.

I am now in the position to clear about 16K of debt. Which should I clear? However I want to make sure my application for a re-mortgage within the next year goes through - so I'm prepared to keep the debt that will help best make me look good to banks regarding affordability so that I can get offered the best deals.

Complicated one?

Thanks

[Deleted User]

Clear whichever is costing you the most.

robber2

Rememeber that at any time in the future credit cards cos may change their policies and you find that the BT offers dry up. How would you manage? Presonally Id clear those first for peace of mind safe in the knowledge that the loan is on a fixed rate until its cleared.

Rob

Pixie5740

Halfcat wrote: »

Hi,
I have a 16K loan, with 5 years or so remaining at 3%.
I also have about the same on credit card (5 of), mostly on 0% transfers that I pay off at a fixed amount a bit above minimum, about £400 a month. I have good credit card rating for 999 for what thats worth, but low affordability . I am lucky that I always get offered decent 0% balance transfer offers, paying 1-5 to 3% of course.
I also have 2 credit cards that pay cashback that I pay off each month,; work expenses mostly and will keep those.

I am now in the position to clear about 16K of debt. Which should I clear? However I want to make sure my application for a re-mortgage within the next year goes through - so I'm prepared to keep the debt that will help best make me look good to banks regarding affordability so that I can get offered the best deals.

Complicated one?

Thanks

You 999 score is worth absolutely nothing because it's just a marketing gimmick.

https://www.moneysavingexpert.com/loans/credit-rating-credit-score

What will happen when you are no longer offered 0% deals because of your low affordability and because lending dries up? Personally I would aim to repay the credit cards before the promotional rates end.

Superscrooge

There are lots of posts from people with 999 credit scores who are unable to obtain further credit.

Ensure you are always in a position to repay any credit cards at the end of their promotional period just in case you can't get another 0% BT card.

D_M_E

If it were me, I would clear as much off the cards as possible then put the monthly payments of about £400 into a savings account and then clear the loan when there is enough put away.

I would also consider, once the cards have been paid off, asking the loan company if overpayments could be made to the loan as an alternative to savings account.

Halfcat

Will save 1400 of interest of the loan. But if I continue balance transferring the card debts then I will have the BT fee each time anyway.

Halfcat

Thanks All - food for thought. Good point about deals drying up though personally cant see it (all be it rates could go up; simply too good a way of getting interest paying "customers").
Cant imagine all companies dropping BT deals, though they may go up they are too good a way of getting good business for them. Cant remember the last time I actually paid any credit card company interest apart from BT fee for about 15 years.
While I don't take much comfort in the 999 itself, I have never had a problem getting a credit card with 5-15K limits though appreciate times change and my circumstances could too (never missed a payment, have lots of CC credit available that don't use, no CCJs, have a mortgage, stable employment, on electoral register etc. Will have a go at figuring our which will cost the most (OK will have to make assumptions about future BT fees and length of deal.)

D_M_E

A saving of £1400 in interest on the loan is not to be sniffed at and makes the choice much easier - pay off the loan then put the loan payments towards clearing the cards.

enthusiasticsaver

I think having 5 credit cards even if all on 0% will go against you on affordability and the balance transfer fees can all add up. Personally I would get rid of those and then overpay the loan with what you were paying to the credit cards.

Pixie5740

The Bank of England has been getting twitching about the levels of consumer debt for a while now. Insolvency is up and banks are now lending less through credit cards and loans. It has a whiff of the Financial Crisis of 2007 and 2008.