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Advice please

I’ve just started a mortgage in the last few weeks and now want to pay off my credit cards with a personal loan. Just checking that now I’ve got my mortgage in place, there is no issue with this? 

Thank you 

Comments

  • I would not do  this.  Firstly because there may be red flags due to requesting more borrowing just after a new mortgage and secondly because debt consolidation, which is what you are doing, usually ends up with more borrowing and higher debt.  If you have credit cards why not just pay them off gradually rather than taking out new borrowing. 
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  • Hi, thanks for your reply. 

    When you say red flags, do you mean with my mortgage lender or potential personal loan lenders? I’ve done a soft search this morning and I’m pre approved for a loan that appeals. 

    Thanks 
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    If you cannot do the 0% shuffle on your credit cards and the loan interest is less than 10% and over no more than 5 years then do it, you will save money in the long run.  You must cancel all your credit cards when they are paid off though, or you will be in double the debt in a few years time.

    As long as your not borrowing more and your debt total isn't more than your cards then I wouldn't worry.
  • Exodi
    Exodi Posts: 3,419 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Combo Breaker
    edited 16 November 2020 at 2:57PM
    Hi, thanks for your reply. 

    When you say red flags, do you mean with my mortgage lender or potential personal loan lenders? I’ve done a soft search this morning and I’m pre approved for a loan that appeals. 

    Thanks 
    I think he meant red flags with new lenders as it appears as a large amount of borrowing in a short amount of time. It sounds like you're OK though.

    People can be quite blinkered on these forums because of seeing so many taking out loans to pay off credit cards, then re-spending on the credit cards leading to an even worse situation. The general issue being that if you are reliant on credit cards and can't settle them, then you should be addressing the root cause (spending more than you earn) rather than the symptom. Often you see the quip 'you can't borrow your way out of debt'.

    In theory, it is possible to save a lot of money in interest by moving higher interest credit card debt into a lower interest loan. In practice it may not be so easy.
    Know what you don't
  • cymruchris
    cymruchris Posts: 5,551 Forumite
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    What's the interest rate and term of your loan? If it's short and low, then it might be beneficial to transfer - however - if you then go out and start adding things to the credit cards again because you can afford the payments - you'll put yourself in a worse position in no time. If you've got the genuine willpower NOT to spend up the credit cards after moving the balances to a  loan - go for it. Otherwise I'd focus on getting the card balances down rather than moving them. Don't fall into the trap of - 'well it's just £200 - I can pop that on the credit card' - and then 'oh i could do with a holiday (maybe next year!) - I'll pop that on the card and pay for it by (next) christmas' - if you transfer to the loan - your credit cards should be for either 'REAL emergency spending' - like it's December and the boiler has gone bang - or just your supermarket spend that you pay off in full each and EVERY month. 
  • Thanks all. 

    The loan rate is good and my payments would save me around £90 a month by switching. I plan to cut my credit cards up on 3/4 of my accounts if I do switch. 
  • Yan101
    Yan101 Posts: 32 Forumite
    Third Anniversary 10 Posts
    Have you completed on the mortgage or just have the offer in place? I have the offer in place and I'm waiting until completion before taking out any new credit, my advisor said she cant gaurantee a final check or random audit wont take place and it csn jeopardise the offer. On the flip side a friend of mine went and bought a £50k jag on finance a few months before completing their mortgage and it didn't affect them. Just not worth the risk for me. 
  • cymruchris
    cymruchris Posts: 5,551 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    Thanks all. 

    The loan rate is good and my payments would save me around £90 a month by switching. I plan to cut my credit cards up on 3/4 of my accounts if I do switch. 
    Then it sounds a sensible solution if, and only if, you are able to stop yourself getting back into credit cards with rolling balances in the future. Just don't come back here in 3 years time saying 'I can't get a consolidation loan, as I already have one, and my cards are right at their limit! What can I do?" (Actually you'd always be welcome if you did get yourself in a pickle - but just trying to tongue in cheek point out that you really don't want to be in that situation further down the line, and am really trying to hammer it home!! :smiley:)
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