Better to have debts on credit card or loan

Better to have debts on credit card or loan

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mikeyr

Original Poster:

3,118 posts

192 months

Monday 18th September 2017
quotequote all
Internet seems to be giving conflicting advice - wondered about peoples thoughts on here on the situation below.

We have some debt split across a loan and a couple of long term 0% credit cards (roughly split 50/50 between cards and loan) as a result of paying for a operation. Now things are settled again we're looking at moving house now and have reasonable chunk of equity which would ideally go towards larger dwelling.

It's been suggested that mortgage lenders 'prefer' the loan because it's a fixed amount monthly even though we are paying interest on it. We are paying more than the minimum amount on the cards to help clear them quicker; we could clear the loan and put it onto one of these cards if preferable as have sufficient credit.

For purposes of mortgage hunting...
Question 1 - anyone know if it makes a difference to keep debt on one person or better to spread evenly between both of us
(All of the debts are under me). Or move it all to a loan which will be more expensive long term but result in a specific monthly outgoing?

Question 2 - We have a third card (historical) with nothing on it as paid off (read 'transferred') but a large credit limit. Better to cancel this card as it lenders could see it as potential to hugely increase debt OR would it be seen as a long term stable credit example?

Question 3 - Finally, we've got some savings tucked away which we could use to help pay for some of the many house moving costs OR we could pay off some of debt (20%) now. Do lenders care about savings or better to use it to clear some of the debt to look more attractive to a lender?

Or are there no right/wrong answers to these questions? Being a grown up sucks!


mikeyr

Original Poster:

3,118 posts

192 months

Monday 18th September 2017
quotequote all
Should add that it's all very manageable monthly (we are paying off more than minimum and don't need to use overdraft, etc) and estimate it would take another two years to completely clear.

SHutchinson

2,040 posts

183 months

Monday 18th September 2017
quotequote all
If the credit card debt is attracting interest it's pointless having savings. Pay your savings off the debt.

edit: did't read about wanting to move house. Keep the savings for that.

Sarnie

8,025 posts

208 months

Monday 18th September 2017
quotequote all
The impact on affordability is based on how much they cost you per month. If a loan costs less monthly, then that will have less impact on your lending figures.

Credit card payments will be counted as circa 3% of the balance as your monthly payment, irrespective of the amount you actually pay, even if it's more of less.

Lenders don't care about savings. They won't ignore £10k on a credit card because you also have £10k in savings.........

The impact of all of the above is dependent on your income, your LTV and how much you are trying to borrow.........

craigjm

17,912 posts

199 months

Monday 18th September 2017
quotequote all
If you have a reasonable deposit and the overall mortgage isn't stretching you then it doesn't really matter. These things come in to play if you're talking 90% mortgage of 5 times salary kind of scenarios because it is all about affordability

mikeyr

Original Poster:

3,118 posts

192 months

Monday 18th September 2017
quotequote all
Thanks all, that's some useful info as always. Don't know if anyone mentioned it but would it help to split debt across two of us or are lenders only interested in the overall figures?

Sarnie

8,025 posts

208 months

Monday 18th September 2017
quotequote all
mikeyr said:
Thanks all, that's some useful info as always. Don't know if anyone mentioned it but would it help to split debt across two of us or are lenders only interested in the overall figures?
Just the overall debt.....

mikeyr

Original Poster:

3,118 posts

192 months

Monday 18th September 2017
quotequote all
Interesting (excuse the pun!) , thanks Sarnie.