Secured loan v CC pay off

Zoev2004_2

Hi All,

I’m new here so hello everyone!
I have a question that I was hoping you lovely people may be able to help with please.

We are remortgaging in the nex5 few months. We currently have £149,000 on a 3.19% and a secured loan also with the same provider of £24,000 at 5.99%. We pay £1,115 pm on both which the loan part is £192.30.

We have approx £14,000 of cc debt the majority of which is on 0% cc.

We have £10,000 to use to pay off some of our debt.

So, my question is, when remortgaging is it better to have the secure loan outstanding and pay off most of the cc debt or vice versa? I know the golden rule that paying off the debt with the biggest interest rate first is th3 right thing to do in most cases. If we paid off the loan part of our motgage this would free up approx £75 per month until we remortgage.

When we remortgage we intend to include the loan part in with the new mortgage so is it then better to pay the cc debt?

Just wanted to try to work out what mortgage lenders prefer - less credit card debt or less loan debt (tied into the mortgage).

Any views will be gratefully received.

Thank you

System

Rule of thumb is the one with the highest rate of interest is the one that gets your money HOWEVER currently your lowest debt is on credit card 0% deals which muddies the water depending on how long the 0% deals have. This is because you're not guaranteed to get another 0% deal and when you do there is usually a fee of around 3%.

For remortgaging you need to consider the total amount you owe and debt utilisation as all debt will impact the amount you can borrow due to affordability tests. If your cards on 0% are using the majority of their available balance then your debt utilisation would be seen as being high so it would be better to pay those off.

If we paid off the loan part of our motgage this would free up approx £75 per month until we remortgage.

Yes but it could end up costing you more to repay the loan in the long run. £24k at 5.99% with £192/m repayments is roughly a 16 year term. If you include the loan in a remortgage and you increase the term then you increase the total amount of interest you pay on that £24k so you need to do the maths.

Ben8282

I would say as a matter of principal that transferring unsecured debt to secured debt is unwise. If you don't pay the credit card you risk a ccj at the worst. If you don't pay a secured loan you risk loosing your home.