We get many enquiries where the customer has had historic financial issues, missed a payment or two or occasionally, not made a payment at all. Even so, in the current climates, some specialist lenders will still look to assist, albeit at a premium cost.
However, more recently you can’t pick up a newspaper, or put on daytime TV, without seeing the ever increasing number of ‘payday’ type loans available. They are everywhere and pretty self explanatory as to why they are being used, normally more month than money…
But, I want to explore the consequences for those who have taken out a payday type loan (short term loan, high interest rate) and then apply for a mortgage.
Payday loans are being treated, more recently, as an ‘adverse’ entity by some lenders in the market. Even the lenders that accept customers who have had CCJs, defaults, missed mortgage payments registered against them, MAY NOT accept someone who has taken out a payday loan.
One such lender publicised their views this week – ‘Payday loan data is one of many items included in our review and if a mortgage applicant has a current or had a recent payday loan, it is unlikely that we will consider their mortgage application.’
The credit reference agencies have also buckled under the pressure from lenders to show such information on customer credit checks. Companies like Experian now show Payday loans as a separate entry and therefore, make it easier for any prospective lender to see any history with regards to these types of loans, before making their decision whether to lend or not.
There are always two sides to every argument – “if they can’t afford to get to the end of the month, should they be looking for a mortgage?” and “the new loan will be cheaper allowing the customer to be in a better position”.
I’m not against payday loans, they will be right for some people in certain circumstances. But I will strongly point out that if you do take out such a loan, you will most definitely limit the number of lenders available to you when you come to apply for any type of mortgage finance.