Will getting a Personal Loan scupper my chance of mortgage for new house

moneykev

Hi all


I've got £15000 on various balance transfer credit cards and these will need switching shortly. I'm currently paying them off at a rate of £290 per month combined.



I got a letter through the door re:Nationwide Personal Loan at 3% and thought it might be better to simply put everything on that and get rid of the debt without worrying about missing payments, missing transfer deadlines and running up any monthly charges etc.


Doing basic sums and assuming 3% balance transfer fee every 18months, the 2 are not dissimilar in what they would cost over a 5 year period.



The thing is, I'm looking to move house this year and I'm wondering if having this credit is better on a loan or the balance transfer cards? Does it make any difference? Or would a mortgage lender look more favourable on the £15000 loan (and £0 credit card debt) as it shows you're paying it off.



Thanks in advance

Mortgage_Adviser

Although having any unsecured debt is never a good thing when you are gtting ready to get a mortgage they key thing there will be how much you are pyaing monthly for your debts.


On trhe credit cards the lenders typically think you pay 3% of the balance every month, so of 15k it would be £450.


If you can get a loan with the lower monthly payment you are POTENTALLY better of on teh lenders calculators.

foxy-stoat

You aren't "getting rid of the debt" you are just moving it.

If you are 100% sure that you will be offered 3% interest on a debt consolidation loan and your annual salary is over £60,000 then go ahead and apply - but be aware that you may not get the 3% rate and please dont come on here ranting, credit score trashed....didnt get offered the lowest rate.....mis-represented the loan offer....who do I sue.... etc etc

You MAY be better off keeping it all where it is and over paying the debt were you can and reducing the available balances every few months.

enthusiasticsaver

Are you planning on increasing your mortgage? I think I would be more concerned that even on 0% that is going to take you more than 4 years to clear your credit cards and if you are going to have moving costs and increasing your mortgage payment can you afford it?

Consolidation is never good. It almost always leads to more debt. The baseline 3% is only usually offered to a very small percentage of customers so you may end up being offered a loan at a much higher rate. Regardless of whether it is a loan or on credit cards I don't think a mortgage lender would view them differently. New applications for credit just before applying for a mortgage though are not looked at favourably.

kingstreet

Mortgage_Adviser wrote: »

On trhe credit cards the lenders typically think you pay 3% of the balance every month, so of 15k it would be £450

I can think of a fair few who would use 5%!

moneykev

Thanks for the advice - I shall continue to use the credit cards rather than apply for the loan and will up payments accordingly.