Credit card vs loan

Terrixx

Hey guys looking for some help. So I currently have 3 credit cards totalling a balance of £8200.
One where I am paying £47.00 of interest on my minimum payment of £86.00, one with £37.91 of interest on minimum payment of £57.62 and final one of £34.00 on a £50.87 payment.

I’ve been looking at getting a loan with my bank for 8500 to pay off the credit cards, but not sure if I want to do so because I want to get a mortgage next year and I’m afraid it will damage my score. I know it’s basically the same lending and I know it’s going to take me ages to pay off my credit cards. Credit cards are all maxed out. I’m looking to get the loan over 3 years for 256.00 a month. With 6.5% APR and I would be paying back £852.33 on top of my 8500Can anyone give me some help? I don’t want to do anything that will make my score go down Thanks

[Deleted User]

Ignore your score. It's made up and meaningless. Your credit history is what matters.

What's your income? What do you currently owe to who and at what rate?

Your chances of getting a low rate loan are small, given you're maxed out on your card and paying minimums.

If you're looking at a mortgage, how much deposit do you have saved? Coinsider using this to clear the debts.

Go also to the DFW boards for advice on cutting costs and paying back faster.

enthusiasticsaver

Firstly can you move any of those credit cards to 0% deals by using balance transfers? Use the soft eligibility checker on this site. On the interest figures you have quoted you seem to be paying an average of around 17% which is high but not extortionate. If you cannot move them phone your credit card providers and ask if they can reduce the interest rate due to financial difficulties.

Secondly post an soa on the DFW forum and start a spending diary. That will point out where you have been overspending. The soa can be found at http://www.stoozing.com/calculator/soa.php

The biggest thing that will affect your credit history is uncontrolled debt. If you have three maxed out credit cards those are huge red flags. Moving it to a loan and increasing the amount of debt will make it worse and hinder your chances of getting a good mortgage rate.

If you are hoping to get a mortgage next year presumably you are saving a deposit. If so, use it to pay off the credit cards as you will be paying more in interest than you are receiving on your savings.

Finally you will see on the DFW forum virtually no one recommends consolidation as a means of getting out of debt. That means taking out a loan to repay credit cards. The temptation is too strong for people who don't change their spending habits to clear the cards using a loan and continue to spend on credit. Before you know where you are your £8200 could be £20k of debt. Add that to buying a house and how expensive that is and you could very quickly be in trouble.

Terrixx

Thanks ever so much for your reply! Current income is 18,000 basic. But constantly work overtime. Current commitments are approximately £780.00 which has loans in and my !!!8220;big loan!!!8221; which is £240.00 a month finishes in November. This is included in the £780.00 I currently stick £350.00 in savings which I!!!8217;m using for a holiday in April. I have no savings for a house yet but the money I put away for holidays will be going on the house. Me and my boyfriend are looking to have £10,000 deposit between us for £100,000 house

Terrixx

Credit score is currently on a !!!8216;fair!!!8217; rating so the only card I can do a balance transfer on is a capital one and doesn!!!8217;t even touch one credit limit lol !!!55357;!!!56875;

[Deleted User]

As I may have mentioned, the credit score means jack. Stop looking at it.

List out what you owe - the lender, the amount and the rate.

In the meantime, your savings should be going to pay off the highest rate debt, unless you're getting more on your savings in interest.

Candyapple

So you have no savings for a mortgage deposit and want to buy a house next year with £8.2k debt? Okay then. I think you may need to rethink your strategy.

If you saved £350pm from April 2018 to April 2019 you'd only have £4.2k saved and would still have £4k debt.

You should put the house buying plans on hold for now until you have tackled and cleared your debt entirely because on your low salary, any bit of debt you have will be multipled and deducted and from whatever the bank will loan you for a mortgage so it's best to go into it with zero debt.

You earn roughly £1300 per month and are only saving £350? Where is the other £1000 going?

Fill this out:
http://www.stoozing.com/calculator/soa.php

Then you need to enter your debts here:
http://www.whatsthecost.com/snowball.aspx

And figure out ways to decrease your outgoings so that you can throw every penny you can at your debts, even if that means getting a second job or working lots of overtime.

System

Terrixx wrote: »

Thanks ever so much for your reply! Current income is 18,000 basic.

Very very doubtful you'll get a loan as you will most likely not pass any affordability tests.