Product finance vs credit card

andy1988

Hi all,


I have spent the best part of an hour searching the forum for threads relating to this comparison but I cannot find anything. If someone is aware of a similar thread I'd be grateful for the link.

I'll soon be moving into my first house and inevitably I have a lot of items to purchase in order to furnish it. I've been saving for a number of years and have enough "cash" to cover all the items I wish to purchase, however I have this invested achieving very high returns so I obviously want it to remain there.

I'm faced with a few choices for purchasing the various items:
1 - Pay cash and lose investment interest
2 - 0% product-linked finance
3 - 0% purchases credit card to purchase the various items under one finance product.

Originally I expected option 2 to be the easiest and softest on my credit profit as the finance product is intrinsically linked to the item purchased on a defined repayment schedule. There would only be a few items I could purchase via this method, the "big" items (TV, sofa, bed/mattress, flooring and white goods), and I wouldn't necessarily use finance for all of those items if they are more expensive on finance (inflated price). A cash balance would be used for the remaining cheaper items.

After much deliberation and a number of discussions over mortgage affordability I noticed that secured/stable finance looks better on a credit profile than a credit card debt. However I can see 4-5 separate finance products looking quite unsavoury also.

Does anyone have any advice/experience with this? Which method might work better, or even suggest a third? I shy away from paying interest on a loan where I can obtain finance at 0% and with a loan already I am reluctant to take a second.

Any advice would be much appreciated.

Thanks,
Andy

Pixie5740

andy1988 wrote: »

Hi all,


I have spent the best part of an hour searching the forum for threads relating to this comparison but I cannot find anything. If someone is aware of a similar thread I'd be grateful for the link.

I'll soon be moving into my first house and inevitably I have a lot of items to purchase in order to furnish it. I've been saving for a number of years and have enough "cash" to cover all the items I wish to purchase, however I have this invested achieving very high returns so I obviously want it to remain there.

I'm faced with a few choices for purchasing the various items:
1 - Pay cash and lose investment interest
2 - 0% product-linked finance
3 - 0% purchases credit card to purchase the various items under one finance product.

Originally I expected option 2 to be the easiest and softest on my credit profit as the finance product is intrinsically linked to the item purchased on a defined repayment schedule. There would only be a few items I could purchase via this method, the "big" items (TV, sofa, bed/mattress, flooring and white goods), and I wouldn't necessarily use finance for all of those items if they are more expensive on finance (inflated price). A cash balance would be used for the remaining cheaper items.

After much deliberation and a number of discussions over mortgage affordability I noticed that secured/stable finance looks better on a credit profile than a credit card debt. However I can see 4-5 separate finance products looking quite unsavoury also.

Does anyone have any advice/experience with this? Which method might work better, or even suggest a third? I shy away from paying interest on a loan where I can obtain finance at 0% and with a loan already I am reluctant to take a second.

Any advice would be much appreciated.

Thanks,
Andy

This thread for a couple of days ago is similar to what you are asking. You need to look at the total cost.

https://forums.moneysavingexpert.com/discussion/5873132/interest-free-loans

I will also add that if you haven't yet completed the purchase of the property meaning that mortgage funds have not yet been released DO NOT start applying for credit.

Nebulous2

You'd need to provide some more information:-

Have you completed on your house? - If not you might be better not applying until you do. Lenders can do a late credit check and refuse to advance the money if there are credit applications they don't already know about.

What do you mean a loan already? What interest rate is it?

'Very high returns' are only achieved by taking risks - Are the returns higher than the rate on your loan?


I'd probably wait for the mortgage to complete and then apply for a purchases credit card. You can then shop around / price compare / use quidco or topcashback without worrying about whether you can get 0% finance from whoever comes up cheapest.

andy1988

Thank you for your replies. I'll give the other thread a good read through now.

I haven't completed yet, so thank you for that heads up. I didn't intend to buy any furniture before completion but had considered obtaining the CC on the day/day before funds were released so that I could maximise my credit limit and not jeopardise the mortgage. Risky perhaps.

The loan is only at 3%, barely above the rate of inflation, my very modest diversified investment incomes average 5.4% net and the high value, high return I refer to is asset backed investment into my limited company which is in a low risk sector with 150% LTV coverage. Understandably I don't want to withdraw any of this.

The shopping around aspect does definitely appeal to me, I'm a true money saver in most things I do. I'm just a little bit concerned about having too much unsecured debt on my profile as I have 2 credit cards, a Clarity and a day-to-day with <5% utilisation rate but high limits. I use both but pay them off in full, however I was reluctant to add a third card unless it was prudent as it may push my available credit beyond my annual income.

Nebulous2

There is a difference between credit limits and utilisation. I've had in excess of my salary in credit card limits for about 20 years. At times I've had limits of over twice my salary. I've never had a problem being accepted for cards, with generous limits. I've 6 credit cards, having just reduced from 8 about 6 weeks ago.

It need not matter though. If you get a mortgage, have a loan - is there any reason why you would need more debt? In that case you don't need to worry how lenders view you. In a relatively short period of time searches will wear off, they'll see you're paying regularly and maintaining your finances well and your stock will rise again.