Payment break to clear loan

jls85

Morning all,
I am looking for some advice on whether or not to take a payment break in order to clear one of my loans.
I took the original 3 month break on my loans and mortgage as it looked like my job was going to be affected quite severely by COVID, but in the end my employer managed to find alternative work for a few of us to do from home so I have continued to get paid. This may not continue indefinitely though so I have been putting the money I have saved from the breaks and my saved travel expenses etc into an account and by the end of the 3 months I’ll have just under £6000 saved up. 

I’ve now been told lenders might be willing to offer another 3 month break, so my question is, should I apply for it and save up the same again, as this would allow me to pay back my most expensive loan in its entirety, or would I be better going back to paying everything back and just pay some of my debt back with the £6k (minus emergency fund)? 

For info, I have 3 loans: £10,600 at 15%, £6,400 at 6.9% at £18,000 at 9.9%. 

I am also hoping to sell my house once COVID is done to get a new house with my partner. That should free up another £10-£15k (conservative guess given the current circumstances) to clear more debt but also means all being well I’ll be looking for a new mortgage in the next year or so in case that makes a difference.

fatbelly

It makes mathematical sense to throw as much as you can at the £10600 debt. However...

You might need to check that none of this is getting marked as late payment on your credit file as you will be applying for a new mortgage soon.

If you are planning to sell and buy property in the near future you are going to need a bigger than usual pot to draw from. So be careful

jls85

Thank you. All breaks have been approved and I’ve been assured that they won’t impact my credit score (which I know is useless but it is still showing as excellent 2 months in so I think it’s ok), but I’ve also heard that lenders might look at the fact payments were stopped and view that unfavourably further down the line.

So I guess it depends what’s better in their eyes - paying back excess debt or having no breaks in mortgage payments. I’m also aware that I’ve already taken a break so perhaps the damage has already been done in that regard?

Also, as I am planning on selling my house in the next 6 months, moving in with my bf for a bit then buying together within 12-18 months, will they look that far back when evaluating future mortgage applications? Or will the fact I have paid the mortgage off be enough to put their mind at ease? Maybe I should have posted this on the mortgage board!