Payday loans have emerged from being a niche business to being a mainstream financial product over the past few years.
With high interest rates and excessive charges, there are risks to taking out a payday loan but there are concerns taking out a payday loan will affect your chances of obtaining a mortgage.
A report by BBC Newsnight claims that two thirds of mortgage brokers have said they have had a client turned down for a mortgage because they have used a payday loan.
Having outstanding loans can affect your ability to obtain a mortgage, but worryingly there is reason to suggest that some lenders are declining mortgage applications even if the client has paid off their payday loans on time.
Some lenders are viewing the use of payday loans as a warning that the client is in trouble with their finances.
A report by the IPPR has revealed that the majority of payday loans are used to cover every day expenses such as food, petrol and utility bills so it’s not surprising that lenders are viewing the use of payday loans as a sign that people are living beyond their means.
Experian has confirmed that some lenders view the use of payday loans as a sign of financial pressure.
The good news is that mortgage lenders have different processes for approving applications and many lenders treat payday loans like any other forms of credit. If you’re having trouble with one lender, you can try another.
If you’re struggling with payday loans or any other debts then give us a call today.
The Debt Advisor can advise on all kinds of debts and offer a solution that is best for you.
Call today on 0800 0851 825 or 0161 868 2500 if you’re calling from a mobile.