Will a small personal loan (NOT a pay day loan) stop me getting a mortgage?

lizferris1984

So I mentioned in another thread I've taken out a £500 personal loan (NOT a pay day loan). It is repayable over a 2 year term, but it's likely I can pay it off in a lump sum sooner than this.

I'm not planning to apply for mortgage until at least 2 years from now.

Someone has said I won't get a mortgage if I've taken out this loan. I haven't read anywhere that a loan, other than a payday loan, would get you rejected. I'm not paying out any more per month on my accounts since taking the loan, it's actually a bit less.

Will this loan stop me getting a mortgage?

glosoli

As long as its affordable when factored into the credit assessment I am not seeing what the drama is.

Who is the loan with?

lizferris1984

glosoli wrote: »

As long as its affordable when factored into the credit assessment I am not seeing what the drama is.

Who is the loan with?

It's with Oakbrook Finance Ltd. High APR as my credit isn't good at the moment - but it's likely I will pay this off in full long before I make a mortgage application. Repayments are approx £30 per month (less than combined repayments on accounts I used it to clear off).

People have been ranting about it affecting affordability. But it doesn't have much effect on my overal income & will probably be paid off before I apply for mortgage.

chunkytfg

lizferris1984 wrote: »

So I mentioned in another thread I've taken out a £500 personal loan (NOT a pay day loan). It is repayable over a 2 year term, but it's likely I can pay it off in a lump sum sooner than this.

I'm not planning to apply for mortgage until at least 2 years from now.

Someone has said I won't get a mortgage if I've taken out this loan. I haven't read anywhere that a loan, other than a payday loan, would get you rejected. I'm not paying out any more per month on my accounts since taking the loan, it's actually a bit less.

Will this loan stop me getting a mortgage?

According to what you've written you wont have a loan when you apply for a mortgage and on top of that you'll have a history of borrowing money and paying it back responsibly(assuming you don't default on it)


Bigger question would be though why are you borrowing, in the grand scheme of things a small amount of money over such a long period, when you should be saving for a deposit? And if you're not saving for a deposit do you really see yourself able to afford a house in 2 years time?

chunkytfg

lizferris1984 wrote: »

It's with Oakbrook Finance Ltd. High APR as my credit isn't good at the moment - but it's likely I will pay this off in full long before I make a mortgage application. Repayments are approx £30 per month (less than combined repayments on accounts I used it to clear off).

People have been ranting about it affecting affordability. But it doesn't have much effect on my overal income & will probably be paid off before I apply for mortgage.

Ouch! 60% APR! you weren't kidding!!

Your poor credit is more likely to have an effect on your borrowing capability than anything else.


When you sit down and work out your finances to buy a house factor in the cost of using a proper whole of market Mortgage advisor.

lizferris1984

chunkytfg wrote: »

According to what you've written you wont have a loan when you apply for a mortgage and on top of that you'll have a history of borrowing money and paying it back responsibly(assuming you don't default on it)


Bigger question would be though why are you borrowing, in the grand scheme of things a small amount of money over such a long period, when you should be saving for a deposit? And if you're not saving for a deposit do you really see yourself able to afford a house in 2 years time?

I have a 50% deposit through inheritance money (65k) so I don't need to save for a deposit myself. I don't hold the main chunk of money yet - I do have some savings, but it's in a LISA so I can't withdraw from it for anything other than a deposit.

lizferris1984

chunkytfg wrote: »

Ouch! 60% APR! you weren't kidding!!

Your poor credit is more likely to have an effect on your borrowing capability than anything else.


When you sit down and work out your finances to buy a house factor in the cost of using a proper whole of market Mortgage advisor.

The poor credit is being addressed currently - I'm aware of the impact of this. As stated above though, I have a 50% deposit through inheritance money. So the mortgage will be low LTV. I know I need to fix my credit report though, before I get to this stage.

I know the APR is ridiculous! But it's not a payday loan - so from what I've read this in itself shouldn't affect mortgage application further down the line. As long as overall credit report is all good.

firsttimeworrywart

Hi Lizferris1984

As mentioned by chunky, I doubt this loan would impact your ability to get a mortgage. BUT, the fact that at the moment, you have only been able to get a £500 with 60% apr over two years doesn't put you in good standing for a mortgage right now, which is fine as you've said you won't be applying for a mortgage for the next few years!

Don't worry about the loan. Whatever you do, do not default on it, pay it off quicker than the loan term if you are able to (maybe when you get access to your inheritance) and then focus on improving your credit score over the next 12-24 months.

You may also find it beneficial to set up an 'emergency fund' in a savings account that you can access at any time, for emergencies etc such as this

amnblog

What qualification does ‘someone’ have to tell you this loan will stop you getting a mortgage?