Pay day loans are advertised by many lenders on the TV and in the press. But what they fail to make clear is the effect they can have on people applying for a mortgage.
You may have a good credit score an impeccable payment history and a good sized deposit or equity. Everyone experiences unplanned moments when perhaps money is tight and the need for a lump sum of easy money seems very attractive. Unfortunately the view taken by mortgage lenders is that if you have had to take out a pay day loan it seems obvious to them that you are unable to cope financially.
Most mortgage lenders who will consider lending in these cases insist that the applicants are clear of pay day loans for at least 12 or 24 months, there are one or two who may consider an application after being clear for just 3 months. These lenders also tend to charge higher rates of interest and will certainly look at the overall situation far more closely. Most of these lenders are what we call sub prime or poor credit lenders who lend to people who have a poor credit history.
So my warning is, beware of pay day loans at all costs if you intend to apply for a mortgage of any type now or in the future. Surely its better to talk to your bank or building society in order to arrange a temporary loan or facility to cover the unexpected or even ask a friend or family member. Not only will you pay a lower rate of interest, but you will also be protecting your credit worthiness.
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