Question pay of or save in Lisa

Moneysaverjonny

Hello so last couple of years got on top of money had debt from personal loans and credit cards that 2 years ago got the accounts frozen and paying off the debtors on an informal arrangement each month.  

At current projections my target is july 2025 to pay off my debt and have enough for a mortgage when the defaults should be off my credit score 

question is should i be paying the debt off early to help with my mortgage application in 4.5 years or continuing paying at current rate. I can comfortably save 5-6k a year debt is at 9 k left, currently been paying into a LISA And maxing out at 4 k for the 25% bonus but if it takes longer to pay off debt will this be held against me when apply or will
it not matter if still paying off 1-2 years before application? 

Thanks for any help and hope ive explained it thoroughly

ceremony

If you have defaulted on your debts, then they will drop off your credit file six years from the date of the default, not six years from the date you pay them off. So, if you defaulted in 2019 then you'll be 'clear' sometime in 2025 anyway.
The thing to worry about is CCJs. Most companies won't go for a CCJ if you are making a sincere effort to pay the debt off, though.
Personally, since you say that the interest has been stopped, I'd build up a small emergency fund that you can access quickly (even £1,000 in an instant access savings account is good), then max out the LISA for the bonus. If you have money after that, maybe throw the extra at the debt just for your own peace of mind/the psychological benefit of being able to say the debt is gone?

ryanm8655

If you’re debt free I don’t think it will make a difference whether it’s 2 years before or 1 year. May be wrong but a lot of people get decent mortgages with debt.

Obviously makes sense to max out the LISA, assuming your debt is 0%? Beyond that I’d probably clear the debt.

I faced a similar dilemma and went for debt clearance. But I’m fortunate enough that I should still be able to max LISA if I commit. For me I just wanted the peace of mind. Hadn’t been debt free since being 18 and had an opportunity to clear it quickly.

Moneysaverjonny

thanks for both of those comments it seemed more logical that way as well but didnt want to have a problem later down the line

the psycological benefit is a big one, but want to maximise my savings this year ive maxed my lisa and got a safety net as well so next year hopefully will be able to max lisa and pay more off