Using house deposit to clear debt

Muddypaws25

Hello Everyone,

I'm not sure if this is in the right forum area, but please bear with me.

I currently have about £1500 of debt, and not particularly great credit score (which I am working on improving and paying my debts off each month) my debt is showing on my credit report also.
(I'm employed and earning)
I have a house deposit sat to one side, so I am looking for advice as to whether I use my house deposit to clear my debts and start saving again or do I keep up my repayment each month and wait for my credit score to get back to a good place before looking at mortgages.

Thank you

G_M

How much are you earning in interest on your savings?


How much are you paying in interest on your debts?


If the answer is what I expect, it's a no-brainer!

PasturesNew

There is no point having debt if you're wanting a mortgage and if you're sitting on a pile of cash.

Use the house deposit to pay the debts and see that as a "loan" to yourself and instead of paying your debt each month pay that additional amount into your house deposit pile.

Lend yourself the money to settle the debt; pay yourself back each month.

steampowered

Hello,

What is the size of your deposit, and what interest rate are you paying on the debt?

My mortgage offer required me to clear my debt (which was on 0% deals) as a condition of the mortgage (though nobody checked that I had actually done this).

It probably makes sense to clear your debt and keep saving that deposit. Try to minimise expenses for now until you have got your deposit together and moved in !

Muddypaws25

I have the bare minimum interest on my house savings.

I'm paying quite a bit as it's an unauthorised overdraft.

My current savings are 5.5k.

Will this help my credit rating by paying everything off at once, then as suggested carry on saving?

G_M

Muddypaws25 wrote: »

I have the bare minimum interest on my house savings.

I'm paying quite a bit as it's an unauthorised overdraft.

My current savings are 5.5k.

Will this help my credit rating by paying everything off at once, then as suggested carry on saving?

Then as I said, it's a no-brainer! Save yourself all those interest payments on the debt by using the savings that are currently earning you 'the bare minimum'.


It makes no sense to be paying the bank/credit card/whoever interest when you have cash sitting doing nothing!


And yes, the sooner you get rid of the debt, the sooner your credit rating will improve.

Darkslider

You shouldn't be getting into an unplanned overdraft if you've got 5.5k in cash! As said this is a no brained!

diggingdude

pay off the overdraft and repay yourself including the interest you would be paying. That said if you are in an unplanned overdraft do you have the budget to be buying right now?

Thrugelmir

Muddypaws25 wrote: »

Will this help my credit rating by paying everything off at once, then as suggested carry on saving?

Are you a First Time Buyer?

steampowered

Muddypaws25 wrote: »

I'm paying quite a bit as it's an unauthorised overdraft.

OMG - pay this off ASAP !!!!

Unauthorised overdraft costs are massive both in interest and fees. You are burning your money away.

Clear that overdraft entirely and continue saving.

Muddypaws25 wrote: »

Will this help my credit rating by paying everything off at once, then as suggested carry on saving?

It will be a condition of your mortgage that you have to clear this, regardless of your credit rating. And yes it will help your credit rating enormously to clear an unauthorised overdraft.

Saga

Can only reiterate everyone - pay off all debts asap, then save.

To get a better return on eventual savings open up a Help to Buy ISA or a Lifetime ISA: https://www.moneysavingexpert.com/savings/help-to-buy-ISA/