Jump to content

Using credit cards to save for a deposit - good/bad idea?


Recommended Posts

We've had a question come through on Youtube this week, and I'm interested in hearing what the forum thinks.

"Is it possible to pay your bills off using a credit card for few months, and using the money saved in your current account for a BTL deposit? How will lenders look at this if you manage to stay below 30 percent on credit card usage? Thanks."

Would you endorse this method of saving for a deposit, or do you think it would cause more stress in the long-run?

 

Mark Rocks
Community Builder and Content Writer

www.propertyhub.net

01_original.png

 

Link to post

The wife and I did just this when relocating, we both had excellent credit rating and were able to get interest free on purchases. We literally bartered them, then used the cash we didn’t spend as a deposit on our next home turning our previous into ctl then full btl later on.

it worked for us but we were buying residential and this was our only debt (other than mortgage). I’d do it again if I had to, at the time we couldn’t sell, we’d relocated and were expecting so needed to do something.

Link to post

I wouldn't recommend this - has the potential to go horribly wrong and once you mar your credit record it may take a long time to recover.

By all means use a credit card judiciously, but better to cut your spending to save for the deposit. Paying bills on it is only putting off the time when you have to pay the debt.

Link to post

If the circumstances fit, I think it’s fine. As you say it’s high risk and you need to be fully aware of this, but we could more than afford the payments on both mortgages and the cc, just didn’t have the time to save a deposit.

We did cut spending and saved, and continued to do do so after purchase but then rather than use this for the deposit we paid off the cc that allowed us to save the deposit in half the time when needed.

As I said we had no other debt so we were just releasing our previous good habits.

speaking with friends, most have a cc debt or a Hp/lease agreement for something and still get a mortgage, using the cc was just a way of putting us back to similar short term debt levels as them. The difference was we had an extra appreciating asset with ours rather depreciating asset they had.

As I say if the circumstances if the circumstances are right it’s fine.

Link to post

It all depends on how much credit card debt you take, and how much money you earn. As long as you earn enough to pay back you credit card debt, you should be fine.

For me, I've used credit cards for short term cash flow when I need to close a deal. 

Debt is an amazing tool, when used responsibly. It's a little like beer! Great in small quantities. Disastrous if you have too much!
 

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

Link to post

This is part of a chapter on Consumer Financing in my forthcomimg book on Property Financing, so it's a relevant for me to chip in.

In summary, I would say this...

a) It's not advisable and in some cases even possible to use debt to fund a purchase deposit; most lenders ask the source of your deposit and really don't like it if it's come from debt.

b) Consumer finance is often convenient (yay!) but can be expensive, can snowall out of control and sits on your credit file for 6 years (boo!), so it's best done for SHORT-TERM requirements only, such as works/materials funding where you have a clear exit to repay the debat within say 1 year such as through a sale or refinancing. This is the optimal usage of this type of funding strategy I would suggest.

c) In truth I have done this in the very distant past but in a similar way to giles s; i.e. it's a last reesort and not a first choice source of fundng I would suggest. The rules were different back then as well.

Basically...pick b) if you are considering this.

Ping me if you want to know when the book will be published, or look out for it on Amazon some time in Q2...

Best

Richard

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

Facebook Page | TwitterLinked In

Let's connect...mention The Property Hub :)

Link to post

It’s how we got the remainder of our deposit.   Didn’t spend a penny of our money for three months and banked it apart from a few outgoings like mortgage etc.  We took out three credit cards but spent nearly 4 months living like students.  It gave us the deposit we needed.   It’s sooo important to then pay the bad dept off as fast as possible.    As previously said it all depends on your personal finances.  We are now heading. For property 5.    

Link to post
1 hour ago, Stephen clay said:

It’s how we got the remainder of our deposit.   Didn’t spend a penny of our money for three months and banked it apart from a few outgoings like mortgage etc.  We took out three credit cards but spent nearly 4 months living like students.  It gave us the deposit we needed.   It’s sooo important to then pay the bad dept off as fast as possible.    As previously said it all depends on your personal finances.  We are now heading. For property 5.    

Sometimes you need to get scrappy to get ahead

_______________________________________________________________________________________________________________________________
Vin Gupta
Property Investor and Developer
UK Property Blog: https://evolutionblogger.com/article/uk-property-articles
Travel Blog: https://soulfultravelguy.com/

Link to post
On 3/7/2021 at 4:33 AM, russiansergey said:

@richard brown Iam really interested in your upcoming book.

Iam really enjoying your podcast and can't wait to purchase your book.

May I ask when it's going to be released as Iam eager to read it ASAP.

Thanks for asking and the kind words @russiansergey, I don't have a definite release date just yet. I do have a goal of writing 50,000 words by the end of March, however (it looks like it will be more than that). The book will then most likely be finished, polished and released in April or May, hopefully. If you want to be one of the first to hear, best to drop an email to my admin assistant (Karen) admin@thepropertyvoice.net and ask to go on the new book wait list. Failing that, I will probably start splashing it around my social media nearer the time 😉

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

10%+ ROI property deals every week: check out PROPERTY DEAL TIPS
Amazon best-selling author Property Investor Toolkit & #PropTech, YPN Magazine columnist & PODCAST host

Web & Blog: The Property Voice | Curated property news & insights feed

Facebook Page | TwitterLinked In

Let's connect...mention The Property Hub :)

Link to post

@richard brown thank you so much for your response, I really appreciate it.

Iam going to drop an email to Karen immediately , I want to be the first to grab your book.

You mentioned in your latest podcast episode that In your new book you will be talking about private financing raise, funding investment activities.

That is going to be very interesting 

 

Link to post

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...