Optimising credit for remortgage

Alextatt

Getting ready to remortgage in a year's time. We will need to borrow more money to pay off a help to buy loan and I am trying to optimise our finances for the affordability checks. I have done the other basics but I need advice on whether to concentrate on clearing a credit card debt or paying off a personal loan debt.

We have £6k debt on a 24 month interest free credit card and £7k on a personal loan, which we pay £20 a month in interest. We will be able to nearly pay off one of these in a years time. Which one would affect the affordability check more and therefore which one should I concentrate on trying to clear?

Thanks,

Moneyminded

Both are debts that require payment so both would be taken into account for affordability purposes.

As you are currently paying interest on your loan I would focus here first. Once that is gone throw all the money you were paying towards the loan to clear your credit card before the 0% interest period ends. Remember to make sure you are paying at least the minimum monthly payment on your credit card whilst you pay down the loan.

Good luck

ACG

Do you know who you plan on applying to?
You can have a mess around on their affordability calculator.

If not, then general rule of thumb is lenders use an assumed amount (usually 3% of the balance on credit cards as a commitment), the loan they would use the monthly repayment. So whichever is the higher at the time of application would usually have a bigger impact on affordability.

Butt hat is just generic, some lenders will ignore commitments if less than 12 months to run. Your loan will still have the same monthly repayments until it ends where as a credit card will come down.

With 12 months to go, it might be worth putting spare money in a savings account and then using it to pay down the one that will have the biggest impact closer to the time?