Tagged in: Payday Loans

Can a History of Payday Loans Destroy Your Chances of a Mortgage?

The payday loan industry is booming. Millions of people are getting short-term cash into their bank accounts every year, and this shows no signs of slowing down for the foreseeable future.

Legitimate payday loan companies are everywhere online, which makes it extremely easy for applicants to get cash in their bank account when they need it the most.

Maybe you have a history of taking out payday loans and now wondering if they can hurt your chances of getting a mortgage?

In the majority of cases this will have no effect at all, especially if you only took out a few payday loans and always paid them back on time.

The problems start if you ever missed payday loan payment deadlines, as these kind of details are reported on your credit file. This means that if you didn’t always pay the money back on time, you might find that your credit score has been negatively affected.

Mortgage lenders look very closely at your credit report, and it is one of the main factors that helps them come to a final decision. If they see that you have not always paid payday loans back on time, or even defaulted on them altogether, then this could lead to them rejecting you for a mortgage loan.

In order to find out if your credit score has been negatively affected by payday loans, it’s a good idea to request a copy of your credit report. You can do this free of charge from any of the major credit agencies, and you should receive your copy within a few days.

Once you have your credit report then you need to look over every item closely. Sometimes there might be mistakes, and it is often a simple process to contact the credit agency and get the offending item completely removed from your report. When you do this, you should see an immediate boost in your credit score rating.

Ultimately, there are many different factors that mortgage lenders take into consideration when looking at your application.

You may have missed payday loan payments in the past but still get accepted for the mortgage loan you want, while on the other hand, your credit report might be completely clean but you end up getting rejected.

The most important thing to keep in mind is to never give up. Just because one mortgage lender rejects you, that doesn’t mean the next one will. Persistence is the key.

Payday Loans – What Are They?

Payday loans are small cash loans which are normally borrowed for around a month. Depending on the lender, you can usually apply for anything from £50 all the way up to £1250, which is typically repaid on your next payday. They are usually used to help cover the costs of urgent expenses like a high utility bill or a broken washing machine, but people also use them for less urgent costs like holidays.These loans are generally called anything from ‘cash advance’ to ‘emergency loan’, and have steadily become more popular in Britain over the past two years. Originating from the USA, these short-term loans have gone from strength to strength, making billions over the last 20 years over the pond.It’s really easy to be able to get yourself one of these payday loans. All that needs to be done is:

  • Enter in your details into the quick and easy online form and receive a loan decision.
  • Once you have been approved for the loan, check through the terms and conditions.
  • If you’re happy with everything, then just sign your agreement online.

It’s really that simple. Once this easy process has been completed, you then just have to wait for the cash to arrive in your account. This will usually be on the same day of applying, and in 60 minutes in the majority of cases.

payday loan

Another reason why customers like this form of short-term credit is because of their confidentiality. When applying for the loan, you will not be asked what you reasons are for taking out a payday loan. Not only this, but they are available to people who might suffer from an unfavourable credit rating. If this is the case, they might not have been able to get other loan types. The reason why bad credit isn’t taken into account is because the lender will look more at you ability to pay the loan back, rather than any difficulties that you might have experienced before.

Despite the fact that these short-term loans are a fast and simple way to be able to get extra money to help with emergency expenditures, it doesn’t mean they should always be used. They aren’t always the cheapest credit option so you should make sure that you would be able to afford the repayments. Also, they should not be used to help with long-term debts as they are only supposed to be used to ease temporary cash flow problems.

What Will Be The Fate Of Payday Loans?

It’s hard to avoid in the news this week about Parliament voting on the subject of the payday loans industry. Critics of the short-term loans industry are calling for caps on the cost of credit and cut down on the number of people using payday loans.

This comes after one of my recent blogs talking about the fact that moneysupermarket.com reported a 58% rise in demand for payday loans, as they seem to be increasing in popularity.

The biggest critic of the payday loans industry is Labour MP Stella Creasy, who is leading the call to change the way that the short term loans industry works. It does make you wonder though, what will happen to the customers if payday lenders weren’t able to compete anymore, as more and more people are taking out short term loans to help with emergency finances.

When used correctly, payday loans can actually work out cheaper than going over your overdraft limit and paying for high bank fees. The danger is, when people use them either to cover longer term debts, pay off other loans or use them not as a temporary solution. This is something that we always discourage here at Pay-day-loans-uk.co.uk, as we stick to a code of responsible lending.

To work out if you will be able to afford your loan, instead of looking at the ‘high interest rates’ (APR), you should instead look at the repayments charts of your lender. For example, some lenders charge £25 on top of every £100 that is borrowed, but this does vary between loan providers.

So, what will happen in this vote to amend the Finance Bill? Will it affect the payday loans industry? If a cap is placed on interest, will it then price out all of the lenders, meaning people will have no choice when it comes to emergency credit? Who knows. We will have to wait and see what decision is made and how it affects customers.