Today's tip - payday loans

amnblog

This year we have seen a number of adverse credit mortgage applicants who have been taking payday loans in the mistaken impression that they will improve their credit rating.

Please note that payday loans (which show up on your credit file) ring alarm bells for mortgage lenders, even adverse credit specialists.

To a lender they are an indicatation that you are not in control of your monthly budgeting.

Avoid them at all costs.

Abu-Dina

Agreed. PDLs are poison! I took out several of these loans last year. Actually it was a loan for £100 which I deferred several times thinking that paying the interest every month would improve my credit report.
Didn't need the money at all but to a potnetial lender I can see how this can look really bad.

Spoke to a so-called adverse credit mortgage adviser whose blogs litter google and he advised that I had no chance with any high street lenders.

He was wrong... I did manage to get one, so PDLs are bad but that doesn't mean no mortgage with high street lender.

BTW, I closed the PDL account two months ago. Never again!

Bufger

Its worth anyone looking to get credit to know the general rules of lending.

By having no credit history lenders will see you as an unknown risk and automatically label you as the worst case scenario - high risk. You have no proof that you can manage credit.

By having credit you're only paying the interest on (ie as above) you're showing your in financial difficulty. You dont have the cashflow to cover your spending and have had to have help.

Defaults, CCJs etc speak for themselves.

By taking out payday loans you're showing a smaller scale cashflow issue but the percentages attached to these are the risks to the banks. They are very aware that a debt spiral from use of these companies can come quickly leaving them affected if they were to loan you money.

So, the best way to do it is to have credit, pay it off in full (ie only buy things when you have the cash to and do it via credit with benefits).

ACG

Pay day loans arnt as bad as people make out.
Yes they do not look great on a credit report - but if its a 1 off and you can explain it (ie you were expecting wages which were never paid) there are exceptions with some lenders.
If your doing it every month then it could be a sign that there are bigger issues to resolve.


As for the 1 billion percent interest rates - dont get me started. If you borrow £100 and pay back £120 thats 20% interest (in my opinion) APR just does not work on short term loans.

Dorset82

Avoid like the plague!