Payday loans are an expensive last resort, even if more and more people are - for better or worse - turning to them.
But potential borrowers beware – getting a high interest unsecured loan could put your chances of getting a mortgage in the balance, as lender GE Money has confirmed that it will no longer consider mortgage applicants who’ve taken out these sorts of financial products.
A GE Money spokesman said: “As a responsible lender in a challenging market we review a range of data to make prudent mortgage lending decisions. Payday loan data is one of many items included in this 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.”
Credit check companies are under increasing pressure to highlight payday loans when they undertake checks. Experian, one of the biggest players in the market has recently started listing payday loans separately, when it previously used to list information as a general overview.
James Cotton, mortgages expert at London & Country, Gocompare.com’s mortgage partner said: “The payday loans market has grown hugely in recent years and so mortgage lenders are bound to be keeping a close eye on it as the amount of payment data grows – especially in the current climate where lenders are being cautious.
“If data they get from companies like Experian suggest that someone who has taken out a payday loan is more likely to struggle to keep up with their mortgage repayments, then lenders may well take this into account when assessing a mortgage application.”
Even if you have a mortgage already, it’s worth being mindful of your rating. “When you apply for a mortgage, the lender will have full access to your credit report – this can include details of any loans or credit you’ve applied for, even if you didn’t actually take them out,” says James. “If you’re in the process of looking for a new mortgage, then bear in mind that any other credit you take out or apply for could impact on your ability to get a new one.”