Payday loans

amstel2

Hello

I have some adverse information (bankruptcy) on my credit report from March 2008 which has prevented me accessing mainstream credit deals. However, this has not bothered me as the information is due to fall off my file next March.

However, recently due to emergencies I had to take out two payday loans. I repaid both of them on time & have not taken out anymore since & have now joined my TUs Credit Union.

However, I recently read that these type of loans are regarded as“sub-prime” & recorded differently from other credit agreements on your files & even though they where repaid within the terms of the agreements they could still adversely effect applications for any future credit from mainstream lenders.

Is this true. I have contacted all the CRAs & as they just say it is up to the individual lenders.

Thanks

fermi

I'm slightly sceptical of the info here, but may help ---> Do payday loans damage your credit rating?

gb12345

fermi wrote: »

I'm slightly sceptical of the info here, but may help ---> Do payday loans damage your credit rating?

I'm more than sceptical .

Payday loans are seen by many mainstream lenders as a sign of someone who is on the edge financially and living beyond their means.

fermi

---> Payday loan 'risk to new mortgages'

Taking out a payday loan could endanger people's chances of getting a mortgage whether or not they had difficulties repaying the cash, the BBC has learned.

Nearly two-thirds of brokers contacted by trade publication Mortgage Strategy for Newsnight had a client turned down for a mortgage after a payday loan.

A record of a loan will remain on a credit record for nearly six years.

Business Secretary Vince Cable said borrowers would receive warnings under future advertising regulation changes.

According to evidence gathered by Newsnight, many mortgage applications have been instantly declined and credit scores adversely affected after people took out payday loans.

Out of the 279 replies received by Mortgage Strategy, 184 brokers said they had clients in such a position.

Jonathan Clark of Chadney Bulgin financial planners in Fleet, Hampshire, advised a couple who took out multiple payday loans on getting a mortgage under the government's Help to Buy scheme.

"I knew it was going to be a problem, but I was a bit shocked by the response I got because apart from one or two who said they could be accepted subject to a credit score - which is a polite way of saying it probably won't work - most of them were very negative and said it would be an instant decline.

"That was regardless of their income, the conduct of their accounts and everything else... these were major High Street lenders."

The trade body that represents payday lenders, the Consumer Finance Association, said it would look at whether customers should be warned about the consequences before they take out a payday loan.

It said it has asked the Council of Mortgage Lenders and major credit reference agencies for more information.

The revelation comes as the government is to introduce a new law to cap the cost of payday loans.

Scrootum

gb12345 wrote: »

I'm more than sceptical .

Payday loans are seen by many mainstream lenders as a sign of someone who is on the edge financially and living beyond their means.

Seems pretty obvious to me, unless I am missing something.

MEM62

You can't have it both ways. The mainstream lenders are being pressured to be more responsible in their lending and rightly so. If someone needs a payday loan I believe they should have access to it from a reputable company that behaves in an ethical fashion. However, if an individual is in that position then it is difficult to accept that they are also in a position to take on a major financial commitment such as a mortgage. If you cannot survive month to month how are you going to service a mortgage. It is therefore understandable that lenders should be wary of people that have used payday loans. I view that as responsible lending.

amstel2

Thanks for the info.

Seems obvious to me that a warning should be given when applying from now on but lenders should not be able to hold it against someone prior to when any legislation changed. However, in the the secret state we now live in i doubt that willchange.

Thrugelmir

amstel2 wrote: »

Thanks for the info.

Seems obvious to me that a warning should be given when applying from now on but lenders should not be able to hold it against someone prior to when any legislation changed. However, in the the secret state we now live in i doubt that willchange.

Not a question of holding it against someone. More a question of common sense. If someone is struggling to make ends meet on a month to month basis. Then the likelihood of paying 300 months of mortgage repayments without a single issue is very low.

DCFC79

amstel2 wrote: »

Thanks for the info.

Seems obvious to me that a warning should be given when applying from now on but lenders should not be able to hold it against someone prior to when any legislation changed. However, in the the secret state we now live in i doubt that willchange.

People do have a choice

yoshiyella

I personally have used payday loans in emergencies such as when the DPF went on my car, £600 repair job. I have been in rented accommodation for 15 years and not once have I missed a rent payment and so would never miss a mortgage payment either (which where I live would be some £2-400 cheaper per month). Using payday loans on a monthly basis should of course be taken into consideration but one offs should not be.

gb12345

yoshiyella wrote: »

I personally have used payday loans in emergencies such as when the DPF went on my car, £600 repair job. I have been in rented accommodation for 15 years and not once have I missed a rent payment and so would never miss a mortgage payment either (which where I live would be some £2-400 cheaper per month). Using payday loans on a monthly basis should of course be taken into consideration but one offs should not be.

The fact that you are having to use a PDL for an emergency shows that you are living on the edge financially, with no ability to build a savings buffer - so as far as a mortgage lender is concerned you are still a higher risk than someone who has sufficient savings to cover little emergencies.