Many people who are planning to take out an apartment on credit are concerned about the compatibility of mortgages and credit cards. Let’s figure out whether their presence will affect the bank’s decision on a loan, and whether it is possible to pay for a mortgage with a credit card.
What influences the mortgage decision?
To begin with, each bank has its own criteria on which it relies when assessing the borrower.
Be sure to pay attention to the following information:
- Borrower’s income. This is one of the most important criteria. The amount of earnings, stability, and even the prospects for career growth must be taken into account. They are often asked to indicate additional income, such as help from relatives, interest on deposits, bonuses, etc.
- Education and profession. These parameters allow us to predict how quickly the borrower will be able to find a job if he has to leave his employer.
- Regular expenses. We are talking about minor children and dependent relatives, as well as payments for existing obligations.
As for having a credit card, the opinions of banks are divided.
In what cases is a credit card a plus?
An actively used credit card has a positive effect on your credit history. If the borrower makes payments in good faith and does not make late payments, his credit rating has a high coefficient. In this case, it is not even necessary to repay the debt immediately; it is enough that the money for its payment arrives on time and within the deadline set by the bank.
The negative role of credit cards in mortgage decisions
When applying for any large loan, including a mortgage, the bank examines current obligations and classifies payments on them as regular expenses. Therefore, credit cards with large amounts of debt may have a negative impact on the decision on your request.
For many financial institutions, the maximum allowable limit for regular expenses is considered to be 50% of the total family income. Those. with a salary of 10 thousand dollars, maximum loan payments should not exceed 5 thousand. Otherwise, the borrower risks being rejected.
Constant delays on credit cards or a large number of loans (more than 5) can also become a decisive factor for a negative decision by the bank.
Can you use credit cards to pay your mortgage?
The answer to this question is unequivocal – you can make mortgage payments with a credit card. Banks do not see any obstacles for a borrower to pay a mortgage by credit card.
So we see that a credit card can play both a positive and negative role when applying for a mortgage. It all depends on your approach to using a credit card, the number of overdue payments, and the total amount of debt. Moreover, from the point of view of banks, a credit card is no different from consumer or targeted loans.
The main thing is to use borrowed funds wisely, repay the debt on time, and correctly calculate your capabilities when applying for any loan. If you can prove your ability to repay your mortgage on time, no credit cards will prevent the bank from giving you a loan.
Payment through the services of the creditor bank
On the websites of many banks, there are special services for repaying debts not only to their own but also to third-party borrowers. There are also specialized loan repayment services. They use a standard work scheme.
Procedure
- In the payment gateway, the details of the card from which the transaction will be carried out are entered.
- Next, enter the recipient’s account number.
- The commission is calculated automatically and will be indicated on the screen before the transaction is completed.
- Payment is made.
- Typically, money arrives on the day of payment or the next day.
Commissions
Fees depend on the bank performing the transaction. The average commission amount is from 0.8 to 3%; an additional fixed fee can be charged.
Payment via cash transfer
To pay off a debt with a credit card, you can withdraw cash from it and then deposit money into the card account through a bank cash desk or using the lender’s ATM. This opportunity is available for cards whose programs, in principle, allow you to withdraw cash from a credit account.
To carry out a transaction with minimal financial losses, the terms of the card must provide for the possibility of free cash withdrawal. Otherwise, the commission may be up to 4% + a fixed amount, an additional increased interest rate is charged on the withdrawal amount, and the grace period of the loan is interrupted.
Disadvantages of paying a loan with a credit card
There is one advantage of paying off debt with a credit card: you will not be late on the loan and will not ruin your own credit history.
The disadvantages may be more serious:
- Your total debt will increase, and difficulties may arise with further debt servicing.
- This operation will cost more.
- You may not be able to calculate your own financial capabilities; there is a risk of taking on debt.
FAQ
How to pay a loan with a credit card?
If the bank allows it, you can make a direct transfer to make the loan payment.
Is it possible to take out a cash loan and pay off the loan debt?
Yes, if your credit card program allows cash withdrawals.
If the bank does not allow you to repay the loan with borrowed funds
As a rule, banks do not interfere with clients who want to repay a loan or repay part of the debt with borrowed funds. But there are financial institutions that only allow loan payments to be made in cash or by debit card transfer – if you make a loan transfer from a credit card, the monthly payment will not count. If the bank has such a restriction, the following method may be suitable: withdraw cash from the credit card and pay for the payment with it.
This can be beneficial in two cases:
- If the interest on the loan is higher than on a credit card.
- The credit card has a cash withdrawal function and is subject to a grace period. The fact is that credit cards are created primarily for non-cash payments. Cash withdrawals may not be subject to a grace period, a fee may be charged for the transaction (on average 3-6% of the amount), and the interest rate for cash withdrawals may be much higher than for non-cash purchases.
Before withdrawing money from a credit card to repay another loan, we recommend that you study the terms of this operation and calculate the possible overpayment, taking into account the commission and increased interest for cash withdrawals.
Alternatively, you can transfer money from your credit card to your debit card and send your monthly payment/withdraw cash from it. In this case, it is also necessary to carefully study the terms of transfers from a credit card – limits, interest rates, commissions.
