How will taking personal loan affect mortgage

umair_me · 23 June 2020 at 5:00PM

My credit score on Experian is excellent. I am a fulltime employee and am self-employed for 1.5 years. I want to take a personal loan of about £7500 maximum to buy a car but I am also planning to apply for a mortgage in 3-4 months. How much will this personal loan affect my credit score and acceptability of mortgage? Should I apply for a mortgage first or am I ok to get the loan without having a huge impact on the decision of mortgage.

DrEskimo · 23 June 2020 at 5:08PM

The actual impact will depend on the other details of you (and any joint applicants), such as your income levels, other debts, how much you want to borrow and the house value. Generally speaking, it can reduce the amount you are able to borrow. In particular, having debt payments will impact how a bank rates you in terms of affordability.

Some online mortgage calculators will ask for debt, so you can do it with and without to get a rough idea.

Is there any reason you are looking to borrow to buy a car? Is it urgent? Can you not wait and save up the payments you will make and then buy one? What about buying a cheaper one with savings you currently have?

DCFC79 · 23 June 2020 at 5:17PM

umair_me said:

My credit score on Experian is excellent. I am a fulltime employee and am self-employed for 1.5 years. I want to take a personal loan of about £7500 maximum to buy a car but I am also planning to apply for a mortgage in 3-4 months. How much will this personal loan affect my credit score and acceptability of mortgage? Should I apply for a mortgage first or am I ok to get the loan without having a huge impact on the decision of mortgage.

Well first of all your score is only seen by you, lenders see your history.
Your other commitments, your salary and the loan may play a part in you being accepted for a mortgage.
You being self employed may also have an effect.

enthusiasticsaver · 23 June 2020 at 5:49PM

Personally I would go for the mortgage first then wait 6 months before applying for a car loan unless you are not bothered about whether or not you get the mortgage. It may not necessarily mean you are turned down for a mortgage if you have recently increased your unsecured lending but it might have an impact on the amount you can borrow. Also I doubt if they will take your SE income into consideration given you only have 18 months accounts.