Payday Loans Affect Mortgage Applications

An estimated 42% of “millenials” have taken out a payday loan in the past 5 years… but how will that affect their changes of getting approved for a mortgage? It seems some lenders look at different kinds of loans on a person’s credit history in different ways. Your credit history covers the last 6 years and can make a huge difference to the interest rate that a lender will offer you, and even to whether you are offered a mortgage at all.

Mortgage Introducer reports

“… it’s not all doom and gloom for those who have taken out any short-term loan or a payday loan in particular. Halifax Building Society once stated that they treat payday loans in the same way as any other kind of personal loan or credit history. Providing they have been managed properly, and there is no outstanding loan with more than three months on them when an application for a mortgage is made – this information is then included in an affordability assessment… When a lender assesses credit history, they are typically looking for patterns which arise in a person’s spending habits – reviewing both outstanding and completed payments. As an example, if you were to borrow a sum of money on a short-term loan in the middle of the month, this may signal to a lender that you are unable to manage your finances effectively. Something which you will need to stay on top on when you have mortgage payments and other utility bills to pay.”