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Overdraft vs Credit Card Debt
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frainy_180
Posts: 7 Forumite
Hi guys,
Pretty simple question (I hope). If I were to apply for a mortgage in 6 months time and I could I pay off 1 of the following debts, which would be the best option? Or would it even make a difference?
£700 overdraft. Usually in it.
£1800 on an interest free balance transfer card.
Reality is I should be able to pay the card off AND come out my overdraft, but if I could, which is best to cover first to help any applications for mortgage?
Pretty simple question (I hope). If I were to apply for a mortgage in 6 months time and I could I pay off 1 of the following debts, which would be the best option? Or would it even make a difference?
£700 overdraft. Usually in it.
£1800 on an interest free balance transfer card.
Reality is I should be able to pay the card off AND come out my overdraft, but if I could, which is best to cover first to help any applications for mortgage?
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Comments
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I don't actually know but logically I'd have thought paying off the overdraft would be better. Being in an overdraft might suggest an inability to manage day-to-day finances, whereas most people have credit card debt so it's not a red flag.
Also, you didn't say if your overdraft is also 0% interest? If not, definitely pay that off ASAP.0 -
That's a good point. My overdraft is free to use up to £300 into and I often go further in than that. After that, it's a pound a day so probably costs me anywhere between £0 and £7-10 a month.0
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I agree with DragonQ. Get rid of the overdraft as quickly as possible.0
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If you apply for a mortgage you will need to provide bank statements. If you are often in overdraft that will not look good. If you are paying for it then definitely get rid of it. The credit card will affect how much you can borrow but you are unlikely to be rejected because of it. If you have an overdraft you may well be turned down.I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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Cheers guys. Much appreciated. Overdraft it is.0
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enthusiasticsaver wrote: »If you apply for a mortgage you will need to provide bank statements. If you are often in overdraft that will not look good. If you are paying for it then definitely get rid of it. The credit card will affect how much you can borrow but you are unlikely to be rejected because of it. If you have an overdraft you may well be turned down.
We recently got a mortgage with Natwest and we were constantly 1500 overdrawn, it wasn't even asked about nor put in as a condition to repay (gone now though).0
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