PAYDAY LOAN MORTGAGES

A payday loan is a form of short-term borrowing in which a lender provides a borrower with a small sum of money, usually due on their next payday, to cover unforeseen expenses or financial emergencies. These loans are typically for a few hundred £’s and can be easily obtained since lenders typically do not require collateral or a credit check.

However, payday loans have high interest rates and fees, making them an expensive way to borrow money. The repayment terms are often very brief, ranging from two weeks to a month, and non-payment of the loan on time results in punitive fees and charges. Despite their convenience, payday loans should be used with immense caution because they can easily trap borrowers in a cycle of debt. They are also very damaging to borrowers seeking a mortgage in the future, as they suggest that month-to-month expenses are not under control.

The short answer to this question is ‘no.’ A payday loan definitely will not help to improve your credit rating despite what you may have been told.

In fact, they can seriously harm your chances of getting a mortgage. Consider this from a lender’s point of view. They will see that the payday loan was required to give you the help you need, to get you through to your next pay cheque. Do they want to add a mortgage commitment they have funded to that situation?

The impact of a payday loan on your ability to obtain a mortgage will depend on various factors, including the timing of the loan and the specific lender's policies. Negative credit events, such as payday loans, remain on your credit file for six years, along with positive credit history. Some lenders may decline an application from someone who has recently taken out a payday loan, while others may automatically reject an application if there is any history of payday loans.

However, it is generally still possible to obtain a mortgage even with a history of payday loans. Lenders will consider factors such as the loan-to-value (LTV) ratio and affordability assessment. A high LTV ratio may result in a requirement for a larger deposit and higher fees or interest rates, particularly for applicants with credit issues. The affordability assessment examines income and outgoings to determine if the applicant can manage the repayments.

Speak to us at ams: and we can assist in the mortgage process and help you to obtain a mortgage even after you have previously taken out a payday loan.

Typically, a reliable source of income is the primary requirement for payday loan mortgages, although eligibility criteria may differ among lenders. The lender will need assurance that the borrower has the financial means to repay the loan, hence, they may request proof of employment or consistent income, like bank statements or pay slips. It is also commonplace for lenders to need borrowers to be of legal age, possess a UK bank account and resides in the UK. Lenders may evaluate a borrower's creditworthiness by conducting a credit check and may also consider their debt-to-income ratio.

However, owing to the high-risk nature of payday loan mortgages, lenders may consider lending to individuals with poor credit or financial challenges. It is essential to work with a specialist broker, such as ams: when looking to secure payday loan mortgages.

Speak to us today, if we can’t help, it’s not possible.

While it is possible to utilise the funds from a payday loan mortgage for debt consolidation, it is ill-advised due to the typically high-interest rates and fees associated with such loans. These factors may make it challenging to pay back the loan within the stipulated period and could result in a cycle of debt. Instead, if you are looking to consolidate debt and obtain a mortgage, we recommend our debt consolidation mortgage service.

It is possible, but it may limit your options with traditional lenders, as having a payday loan on your credit file usually lowers your credit score. However, if you have a substantial deposit and a good credit history apart from the payday loan, specialist lenders may be more open to your application. Expect to provide additional documentation and information to demonstrate your ability to repay both the payday loan and the mortgage. ams: specialised mortgage advisers offer free initial advice without any obligation to help you find the most suitable payday loan mortgage deal for your needs.

Speak to our experts, if we can’t help, it’s not possible.