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Mortgage After Payday Loans

Declined For a Mortgage After Payday Loans? Find Out How We Can Help You

Mortgage After Payday Loans

Have you recently been declined for a mortgage after payday loans? We can help you!
A payday loan is a short term way of borrowing funds, often lent by internet providers such as Wonga or doorstep lenders like Provident. These types of loans often come with incredibly high interest rates and are designed to be repaid within a month, on ‘payday’.

Whilst these types of loan can provide quick financial aid in unforeseen circumstances, such as emergency home repairs or if your car was to break down, this type of instant money comes with strings attached. For example, the majority of payday loans come with high fees and interest rates – usually over 1000% – comparatively high in relation to the amounts borrowed with these types of loans. So whilst payday loans can appear an effective ‘one off’ solution to financial difficulties, if misused, costs can quickly escalate.

Concerned that your history with payday loans may impact your chances of being approved for a mortgage? Here at Amber Mortgage solutions, our specialist mortgage advisors can help to gain you access to the best deals on the market, regardless of your bad credit history.

For more information

Speak to our specialist advisers today.

01702 619 221

Getting A Mortgage With Payday Loans – Busting The Myths

It is a common misconception that payday loans can improve your credit score. This couldn’t be further from the truth.
The reasoning behind this thinking, is that by taking out a payday loan and then repaying it on time, you’ll appear to be a more credit-worthy applicant to lenders. Whilst borrowing and then successfully repaying agreed amounts of money with other forms of credit, such as on your credit card, would be looked upon favourably by lenders, this is simply not the case with payday loans.

With any form of borrowed money, by law there has to be an annual percentage rate (APR) of interest that will be charged. Whilst a typical loan could come with an APR of 20%, with a payday loan you can expect an APR of 1000% (sometimes more). It is then easy to understand how borrowers can fall into a financial trap with these types of loan. As whilst they are only intended for the short term, many people go on to extend their loan beyond one month.

So, if you were to borrow £100 from a payday lender offering an APR of 1000% and then you had to extend that loan over 6 months, the total interest you would owe would be £232. This would be on top of the original loan that you owe. As you can imagine, borrowing in this way can become a slippery slope to financial worry and adverse credit problems, impacting your ability to secure a mortgage.

Here’s what our client’s have to say!

Payday Loans – What’s The Problem?

So why do lenders interpret payday loans on your credit history differently to other loans?
If you have a credit card that you use to make regular payments which you then pay off in full each month, then this is going to build up your credit score, as you’re demonstrating that you are capable of budgeting and consistently managing your finances.

On the other hand, when you need to take out a payday loan this suggests that you’re unable to manage your money. Regardless of whether you pay back the loan on time, lenders will see payday loans on your credit history and interpret this negatively. This is because of the nature of the loan. Whilst a payday loan may have been needed to help with an unexpected situation, it implies to lenders that you have no financial plans or savings in place. This is why payday loans on your credit record may make you appear a higher risk applicant to lenders and someone who may not be trusted to make their mortgage repayments on time.

So if you should avoid payday loans, what alternatives are available to you in times of unexpected financial difficulty?
Save money where possible – Keep track of your outgoings and try keeping to a budget that allows you to put money aside to be saved.

Cut down on credit card spending – If you have to use credit cards, only do so for purchases you know you can pay off in full each month. This will help you to build a positive credit history that lenders will look upon favourably. Aim to pay off any outstanding credit card debts.

Increase your income – It may seem obvious, but finding ways to increase your cash flow will help alleviate financial pressures and prevent the need for drastic action, such as the use of payday loans. Perhaps you can take on some freelance work or a second short term job? Or maybe it’s time to seek that promotion at work or even move on to a better paying job?

By increasing your income and keeping your outgoings low, you’ll be able to put aside some extra cash in case of a rainy day.

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Can I Get A Mortgage After Using Payday Loans?

Whilst payday loans might reduce your options when it comes to getting a mortgage, generally it is still possible.

As with most adverse credit issues, the success of your mortgage application comes down to timing. Some lenders will decline an application only if you have recently accessed a payday loan, whereas some lenders may decline an application if they have been accessed at all – regardless of how much time has passed.

How Soon After a Payday Loan Can I Get a Mortgage?

All credit events are visible on your credit report for six years, including payday loans. As a rule of thumb, the older the payday loan record on your file, the more likely lenders will be to consider your application.

How soon after a payday loan you can be accepted for a mortgage is also dependent on the loan to value (LTV) ratio. As the bigger the deposit or equity that you have, the better your chances of approval will be.

For professional advice on your current chances of successfully securing a mortgage and the deals available to you, speak with a member of our team today.

Getting a Bad Credit Mortgage With Payday Loan History

In the eyes of mortgage lenders, a payday loan and bad credit issues are one and the same. However, if you know that you have other incidents of adverse credit on your file, then this can add to the difficulty of getting a mortgage after payday loans.

That said, it doesn’t matter if you’re getting a mortgage with payday loans, late payments, defaults, CCJs, IVA’s or after bankruptcy or repossession, with the help of experienced mortgage brokers it is possible to access specialist lenders who will still consider your application. Especially if the defaults were registered three or more years ago and depending on how big of a deposit/equity you are able to offer.

At Amber Mortgage Solutions we regularly assist customers who have previously been declined a mortgage due to a history of payday loan use. So, if you’re worried that your history of payday loans or bad credit is standing in the way of you finding a competitive mortgage deal, make an enquiry with us today!

A friendly member of our expert team will be happy to speak with you about your unique circumstances and help to get you back on track on your property ownership journey.

Speak to your friendly mortgage advisor

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01702 619 221

Open: Monday - Friday 8:30am - 5:30pm

How Do I Know if I Have a Bad Credit Rating?

For some, they may have no real idea they have bad credit until they are declined a mortgage by a high street lender for the first time.

However, for others it may come as less of a surprise to learn that their credit history is far from perfect. You may be receiving letters from credit card companies, are aware of missed payments or are being visited by debt collectors.

The only way to know for sure what condition your credit history is in, is to secure a copy of your credit report.


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How to Access Your Credit Report

It is now easier than ever to obtain your own credit report and see for yourself how you might fare in getting a mortgage.

Once a mortgage application is submitted, the lender will access your credit file information to assess your suitability for a loan. So, if you’re concerned about having adverse or bad credit, we would encourage you to take action sooner rather than later, and obtain a copy of your credit report. This can be done for free, from a wide range of trusted online providers.

Need help getting your credit report? Contact us today and speak with a member of our friendly team for advice.

I Have a Bad Credit Rating – How Much Can I Borrow?

When looking at how much a person can borrow, the first thing many lenders will examine is your ability to afford the loan. This means they will need to look at your income – or income(s) if it’s a joint application – as well as your regular outgoings and other credit commitments.

In addition to looking at affordability, a lot of lenders will also consider your maximum income multiple. For example, 4x or 5x your income(s), depending on the lender.

With lenders now using such diverse methods to assess the extent to which you can afford a potential loan, the best way to prepare would be to discuss your situation with one of our professional advisors.

Having experience of working with bad credit lenders, we can guide you on your next steps to getting the mortgage you need.

Quick FAQs

Have a question about getting a mortgage after payday loans?

Take a look at our extensive FAQ section for the answers to some of our most commonly asked questions, below.

Payday loans are short term credit agreements that are supposed to be repaid within a month. Generally, they have comparatively high interest rates and are therefore considered an expensive form of loan.

Payday loans are designed to be a ‘quick fix’ for people who come up against unexpected expenses. For example, if a person’s car breaks down or emergency repairs are needed on their home.

Payday loans will show on a person’s credit file for six years and may show the name of the payday loan lender (for example, PaydayUK or Wonga), which will act as a red flag to potential lenders.

This depends on the lender and your overall credit history.

Some lenders will automatically decline an application if a person has a history of payday loans, whereas some lenders will still consider applications where the recorded incident was not recent and if there are no other records of bad credit on file.

Generally, high street lenders will not accept an application where a payday loan has been taken out in the past twelve months.

However, if you were to have a bigger deposit and no other instances of bad credit on your file, there are specialist lenders who would be happy to consider your application.

This is possible, but your options will be significantly reduced.

Whilst it’s highly unlikely that high street lenders would consider your application, a specialist lender may still consider your application – especially if the rest of your credit report is clean and you have a sizable deposit to offer.

Contact us today! Our friendly advisors will be happy to talk you through the next steps available to you and help you on your way to obtaining the mortgage you need.

We’re here to help you, not judge you, so call us on 01702 619 221.