Loans advice Loans advice
Page 1 of 2 12 LastLast
Posts 1 to 10 of 17

Thread: Loans advice

  1. #1

    Still gathering requirements...


    Join Date
    Apr 2019
    Posts
    69

    Default Loans advice

    hi all
    I am looking to clear my credit cards before I purchase property next year.
    So far I been looking into personal loans with 6% interest rate vs dividends.
    I want to avoid dividends as jumping to higher band will be more then a loan would be.
    I also looked at Directors Loan but sounds like thats only worthwhile if you can pay it fully back 9 months from accounting period.
    Amount is less then 10k so no BIK on that.
    Anyone got advice if you been in similar situations on what option you went with etc.
    Thanks

  2. #2

    Double Godlike!

    ladymuck's Avatar
    Join Date
    Sep 2005
    Location
    London
    Posts
    12,060

    Default

    When you say purchase next year, when are you planning to apply for your mortgage, what sort of time do you have to repay the debt in?

    If I had enough time, I'd look at 0% balance transfer credit card and pay as much as I could afford each month.

    Alternatively, if time is short and depending on year end timings etc, you could take the loan from your co, then sort your mortgage out, then take out a personal loan / 0% money transfer credit card and repay the loan within the 9 month period.

  3. #3

    Still gathering requirements...


    Join Date
    Apr 2019
    Posts
    69

    Default

    Quote Originally Posted by ladymuck View Post
    When you say purchase next year, when are you planning to apply for your mortgage, what sort of time do you have to repay the debt in?

    If I had enough time, I'd look at 0% balance transfer credit card and pay as much as I could afford each month.

    Alternatively, if time is short and depending on year end timings etc, you could take the loan from your co, then sort your mortgage out, then take out a personal loan / 0% money transfer credit card and repay the loan within the 9 month period.
    Not planning on getting property until earliest May 2021.
    My accounting year end is April 2021.
    2 of the cards I am paying interest currently and other 1 interest starts June next year. So ideally want to pay off them before xmas. Then come May credit score should improve as no high credit use on the cards.
    Issue with 0% card is you cant request certain amount plus not good for credit score if you utilize more then 30% of your cards limit so would need a very high limit to pay off 8k and remain within 30% of limit.
    Last edited by xenomorph; 23rd October 2020 at 21:36.

  4. #4

    Double Godlike!

    ladymuck's Avatar
    Join Date
    Sep 2005
    Location
    London
    Posts
    12,060

    Default

    That's why I asked how much time you had.

    Another cunning way to get your credit utilisation down is to get a new credit card but don't use it. Its overall credit usage, not per card. So, you could move anything interest bearing to a 0% card but don't close the paid off account. If you've got a low credit rating then that might not be achievable for you.

    By the sounds of it, I'd go with a loan from your company and take out a means of repayment before the 9 months are up.

  5. #5

    Still gathering requirements...


    Join Date
    Apr 2019
    Posts
    69

    Default

    Quote Originally Posted by ladymuck View Post
    That's why I asked how much time you had.

    Another cunning way to get your credit utilisation down is to get a new credit card but don't use it. Its overall credit usage, not per card. So, you could move anything interest bearing to a 0% card but don't close the paid off account. If you've got a low credit rating then that might not be achievable for you.

    By the sounds of it, I'd go with a loan from your company and take out a means of repayment before the 9 months are up.
    So for that option if my account year end is April 2021 then I have to pay it back to my company by December 2021?

  6. #6

    Godlike

    Lance's Avatar
    Join Date
    Sep 2013
    Location
    home
    Posts
    5,531

    Default

    I'm not sure any lender is going to see a consolidated debt as much better than credit cards when it comes to assessing your ability to pay off a mortgage.
    If you want to improve your credit rating then take the dividends to pay off all debt.
    See You Next Tuesday

  7. #7

    Double Godlike!

    ladymuck's Avatar
    Join Date
    Sep 2005
    Location
    London
    Posts
    12,060

    Default

    Quote Originally Posted by xenomorph View Post
    So for that option if my account year end is April 2021 then I have to pay it back to my company by December 2021?
    4 + 9 = 13 so that would be January 2022

    Do bear in mind that your accountant won't file your CT600 until your loan is repaid. Doesn't much difference as the amount of CT shouldn't change but it can't be filed until the loan is repaid or declared as outstanding. I can't remember if the CT600 changes if the loan remains outstanding, it's not a situation I've been in.

    However, as Lance says, maybe just take the hit on the tax and take a dividend to repay if you want to show that you've cleared (and kept clear for several months) all your debts. Yes, it may cost more than interest but what value does your credit rating have if you're wanting a mortgage?

  8. #8

    Still gathering requirements...


    Join Date
    Apr 2019
    Posts
    69

    Default

    Yes i agree but sadly its not as simple as that.
    If I take dividends this tax year to clear all credit cards then I will then need to take some form of credit or loan to pay the extra tax on that.
    So come January 2022 I will need to borrow extra to cover dividend tax plus payments on account. Which will be a bigger amount then borrowing to pay back directors loan.
    So whatever way I will need to take out some form of credit. The lower the credit I take out the better.
    Previous poster had a good idea in take out Directors Loan to clear off the cards and then try pay off in 9 months then no issues. If I cant pay off 9 months after accounting end dates then whatever amount is left I can take a much smaller loan to pay remaining directors loan.
    This way my debit will be clear at application of the mortgage and wont need to get loan until after I got the property.
    Last edited by xenomorph; 24th October 2020 at 11:45.

  9. #9

    Double Godlike!

    ladymuck's Avatar
    Join Date
    Sep 2005
    Location
    London
    Posts
    12,060

    Default

    Quote Originally Posted by xenomorph View Post
    Yes i agree but sadly its not as simple as that.
    If I take dividends this tax year to clear all credit cards then I will then need to take some form of credit or loan to pay the extra tax on that.
    So come January 2022 I will need to borrow extra to cover dividend tax plus payments on account. Which will be a bigger amount then borrowing to pay back directors loan.
    So whatever way I will need to take out some form of credit. The lower the credit I take out the better.
    Previous poster had a good idea in take out Directors Loan to clear off the cards and then try pay off in 9 months then no issues. If I cant pay off 9 months after accounting end dates then whatever amount is left I can take a much smaller loan to pay remaining directors loan.
    This way my debit will be clear at application of the mortgage and wont need to get loan until after I got the property.
    Top tip: when you pay yourself a dividend put aside a proportion (say, 15-20%) of it as savings towards the tax bill

  10. #10

    bored now

    eek's Avatar
    Join Date
    Jun 2010
    Location
    😂
    Posts
    26,474

    Default

    This was posted on hpc earlier this week - I post it as it outlines what you need to do

    I'd agree in principle. Though if you spend time on the MSE mortgage forums it's clear it's very difficult to get a mortgage deal if you've any kind of black mark on your credit record.Most people nowadays have to plan for months to be ready to apply for a mortgage. They will pick apart your last 3 months bank statements at a transaction level. Get your travel and childcare costs to make sense on your bank statement compared to your application (as most people tend to underdeclare these) , make sure you don't have any red flag transactions like 'gambling payments' on your account, clear or tidy up overdrafts and credit cards at least 3 months prior to the application, spend weeks trying to remove markers from your credit record for small payments you missed ages ago to silly little things like a missed mobile bill payment or sky payment etc.Under the new credit rules any small things like these can really erode your affordability.
    Even applying for more than one mortgage can impact your chances of getting one. You will normally be advised to take a 'cooling off period' of at least 6 months if you've failed 2 proper applications. This will be shown on your credit record. In theory your broker will chose a bank likely to accept you on first pass.
    Mortgage affordability under MMR is a bit of a dark art, most people still have no idea the amount they will be lent will be reduced by childcare costs, student loan repayments etc. I recall one exple when MMR came in where a single guy on a low salary would be given a mortgage of £80k, but if their application was rerun to add a partner on benefits and 1 dependant child then under the rules it would drop by £79k to less than a grand despite the fact they were still taking home the same salary. Its nowhere as simple as 4x salary anymore.
    As the market is pushing most people to the very edge of their affordability, this becomes more important as the banks feel they can pick and choose customers. I'd say the proliferation of mortgage brokers is a canary in the coal mine for a broken market.

    So if you are starting to buy in March next year - you want the credit cards paid off sooner rather than later - so I would be looking at a directors loan to clear them off by December ready for a few months of using them as purchase only cards.

    Oh and find a decent broker who understands how contractors work.
    Last edited by eek; 24th October 2020 at 12:20.
    merely at clientco for the entertainment

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •