Loan or Credit card balance "best" for mortgage application??

mrpop

Hello

A simple question, that I hope will be simple to answer!

We currently have a fixed rate for 2yrs mortgage with the Northern Rock - it expires in Jan 09. We're obviously going to be going with a new lender come next Jan.

Myself and my DH have balances on both of our credit cards. Now I feel that it would be better (by saying better, I mean I would presume we'd be classed as better to lend to?) by having NO credit card balance come next Jan, but a loan.

DH isn't too sure. I know for a fact that we'd save money by getting a loan to clear the CC's, so that isn't the issue - it's just if by taking out a loan (probably 4 or 5 years) we're a little afraid that we'll suddenly become uncredit-worthy (if there's such a word!).

I'd be interested in hearing opinions. Btw, there will not be a chance of releasing equity in the property when we take out our next mortgage, as there's only a little bit in the property, and we want to keep that as equity.

Thanks.

minimike2

doesnt make much difference really as long as the card balances arent massive. They look more at the monthly payments being affordable for everything you owe. Only get a loan if you arent going to be paying it off longer than it would take to just chip away at the cards and make sure you dont spend on them again, otherwise you end up with double the debt

mrpop

Thank you for your reply, it's appreciated. Think we'll go with the loan option - and yes, the cards will be destroyed when the balances are paid off!

Cheers,

Sarah