CC debt or car finance

[Rockaroundthexmastree]

Hi,
My husband and I are looking at getting a mortgage in approximately 18 months. Currently my husband has 2 debts in his name - he owes around £3500 on a CC 0% interest and paying off a set amount each month. He also has a car on finance which has 3 years left of around £10000. I have no debt.

Obviously at the moment we are saving as much as poss towards a deposit but I think we would be better off wiping at least one of these before the mortgage application although it would mean saving a little longer for the deposit.

The car finance is a higher payment each month than the CC. The CC is interest free however the car finance agreement has a set amount of interest which would be payable regardless of how quickly we paid it off.
Which would you aim to clear first in terms of impacting mortgage application?
thanks!

Clear the car finance. You need to have as little debt as possible before your mortgage app so you pass affordability checks. We don't know what your income is, ate your high earners ?.

Thanks for your reply. Not high earners by MN standards but comfortable for the area we live in.

Car finance if you can. Though 10k is a lot to pay off in 18 months, but I agree that you need as few outgoings as possible to secure a mortgage.

We should be able to wipe it by December all being well by continuing with monthly payments and chucking lump sums at it. This would mean leaving the CC as minimum monthly payments but as it’s 0% and a lesser amount it is quietly reducing

Clear what you can but I wouldn't overly worry. We had just taken out a £10k car loan the month before we got our mortgage. You'll just have to declare it and the bank will probably lend you a bit less.

You should be able to pay less interest on the car loan if you pay it off earlier.

They're not allowed to charge all the interest if you pay it off early - if you ask for a settlement figure, it should be lower than the sum of the remaining payments. What is the APR?

You might be able to pay the car loan down quicker in a roundabout way, but it depends on the interest, and what offers you can get on credit cards - I think the best one now is the Santander 0% card that has a £3 a month fee.

If you put all your spending on this card, which is interest free for 15 months, and then use the money not spent to overpay the loan, you effectively convert the loan to 0%. In 15 month's time, you can just transfer it again to a new 0% deal.

For any 0% deal, pay the minimum plus a token amount (if you can't choose this by DD, it might be easier to set at SO at the current minimum payment), as this removes the minimum payment marker off your credit file which is seen as a positive by lenders.

As for which is better re: paying off debt vs increasing your deposit, that depends on many factors such as deposit size, affordability etc.

Thanks - I have actually just rang car finance and you’re right we would save on interest by paying it off early with a settlement figure. Interest is high I think 14% 🤦‍♀️ Unfortunately it was the only option at the time and the type of car was needed for work purposes.
I had not considered getting a 0% CC for how you suggest and it really does make sense in the long run. The added benefit would be that we fully own the car sooner if we needed rid of it or whatever.
I am going to ask for a settlement figure and do some research into a 0% card and see how the figures add up.
Do you know if it would affect his credit score negatively by paying off early? I have also never had a CC so wondering if this may have the added bonus of building up my credit by paying one off monthly in my name potentially.