Mortgages with a Payday Loan
If you have taken out a payday loan, can you still receive a mortgage?
The answer is YES.
Even if you now have or have had a payday loan in the past, it won’t always prevent you from acquiring a mortgage. However, this will restrict the types of financial institutions and products available to you. What’s more, it may have an impact on the highest loan-to-value (LTV) ratio that lenders are willing to grant you.
It’s important to remember that not all mortgages are the same and that different lenders use different criteria when evaluating applications. Lenders may not want to work with you if you have recently used a payday loan. The fact that you took out a single payday loan five years ago can also cause other lenders to reject your application.
When assessing your utilisation of payday loans, lenders will pay particular attention to the following:
- The frequency with which you use payday loans
- How recent was your most recent payday loan?
- If you’ve experienced credit issues in the past
- Your mortgage’s loan-to-value ratio
Some lenders may flatly refuse your application if you have an open payday loan. Although it’s worth noting that many mainstream lenders won’t accept applications if you have a payday loan on your credit report, they will be less likely to reject you if you have one resolved debt from five years ago.
Payday loans are recorded on your credit report for a period of six years, during which time they may be designated as:
- Advance on earnings
- Credit for the short term
- Revolving credit
I was rejected due to a payday loan
Don’t panic if your application for a mortgage was rejected due of payday loans. We frequently converse with members of the public who have likewise been denied permission to continue and later obtain a mortgage.
Sometimes mortgage applications are rejected at the last minute, which is terrible. Some lenders evaluate applications using computerised systems. Because they haven’t been provided any more information, underwriters will simply reject the mortgage if they find certain problems. Afterward, it is sometimes challenging to get the judgement overturned, but it is doable.
This is why speaking with our experts is always worthwhile. Our consultants can submit your application to the most appropriate lender. Should something raise questions for the underwriters, we’ll be in constant contact with them as well.
We frequently collaborate with lenders who will take into account authorising a mortgage following payday loans. Ask one of our consultants a straightforward inquiry to get started if you’re still hesitant.
What if my payday loan was obtained more than five years ago?
When you most recently utilised payday loans determines everything. If it has been more than six years since your previous payday loan, you should have no trouble getting a mortgage. This is especially true if everything else, like your credit file, is unharmed. Obtaining a mortgage may be challenging, but not impossible, if you previously used payday loans.
It’s crucial to keep in mind that some lenders may still reject you if you’ve ever utilised a payday loan. Some lenders will be suspicious if you have a payday loan history, even if it was ten years ago. Nevertheless, there are numerous lenders available on the market who will generally ignore the usage of payday loans if it occurred more than six years ago.
Why are payday loans an issue for mortgage lenders?
Payday loans are disliked by mortgage lenders because they imply poor money management. However, if you can give a convincing justification for why you required it at the time, some lenders may accept one historical payday loan that was paid back on time.
If, for example, you took it out to pay for urgent auto repairs and the rest of your credit history is flawless, this may not have much of an effect and you may still be eligible for the best rates from some lenders.
However, if you presently use payday loans regularly (and especially if you are renewing them), this suggests that you are having trouble managing your current obligations and will restrict your pool of possible lenders by around 70%.
