Re-mortgaging. Loan vs Overdraft

ndawson83

Towards the end of the year I will be re-mortgaging my house as the fixed rate runs out, no real problem there. The question is what is better to have when remortgaging, a £4000 loan or being £4000 into an overdraft.
What would a bank look more favourably on?

UK007BullDog

Cant really say. Debt is debt. I would think a loan is better as you pay it back regularily every month.
A large overdraft means you are unable to budget and amke ends meet on your income. So an increased risk. So I guess it would be better to have a loan. An overdraft can be closed down at any time as its the bank goodwill to let you have this "credit".

Kodos84

An overdraft is better. When they are judging your potential for a mortgage they want to know if you can afford the repayments. If you have a loan that requires regular payments then that means you have less of your income to spend on repayments. Having an overdraft simply means you have less in the bank, but there are no required repayments. I learnt this recently when arranging a mortgage myself.

An example is having a student loan, they only take this into account if your income is high enough that you have to start paying it back automatically out of your salary from work.