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Life isn’t always straightforward and sometimes a short-term financial decision can create unexpected issues down the line. For example, if you’ve taken out a payday loan in the past to cover a shortfall of money, it can make it more difficult to remortgage in the future.
However, while you may need to adopt a slightly different approach to getting a new mortgage, you do have some options.
We explain more about what these are, how payday loans affect remortgaging and what you can do to improve your chances of success.
It is possible to remortgage after taking out a payday loan, as lenders will assess your loan history in the same way as a normal mortgage application.
Some high street lenders will reject applications from borrowers that have a history of payday loans – even if it has been paid off without any issue.
Your best option may be to use a specialist lender who offers a flexible approach to borrowers with a payday loan history.
If you’re unsure where to find one, the Willows team can give you guidance on the type of mortgages that may be available to you and potentially match you with a lender that fits your needs.
The reason some lenders take issue with the appearance of payday loans on a credit report is because it suggests that your finances may not be stable.
People usually take out payday loans as an emergency measure to tide them over until their next salary payment date. Some lenders take the view that this suggests a cash flow issue that could lead to further problems. However we understand that’s not always the case.
This can be the case even if you paid off the loan without missing any payments or defaulting. The important thing to focus on is to maintain a stable income and to stay on top of your debts, which should improve your chances of being approved.
Like most other credit events, a payday loan will remain on your report for 6 years. Paying it off on time without missing any payments will reduce the impact it has on your credit score.
It is also true that the longer ago it was, the less it will affect your application. For example, if you finished repaying a payday loan 4 years ago, it will have less of an impact compared to a loan that was satisfied within the past 12 months.
If you have poor credit in addition to a payday loan this can make the process more complex, although may still be possible to remortgage.
When assessing your application, lenders will look at your credit report to see:
The above will be considered along with your current salary and the amount of equity available in your home.
The severity of the bad credit events listed on your report will influence how much risk the lender believes could be involved in offering the funds. They tend to look for things like:
If you have any adverse credit events on your credit file, lenders will ask you to provide an explanation. Be as honest and transparent as you can, as this will help the lender to reach a faster and more accurate decision.
To get a better idea of where you stand when it comes to remortgaging, get in touch with the Willows team who can check what’s available based on your circumstances.
If you’ve taken out a payday loan in the past, there are some things you can do to improve your chances of getting a new mortgage for your home.
Getting a quote won’t affect your credit score
Every lender has their own criteria, so the amount you can borrow will depend on a variety of factors. When you apply, lenders will usually consider your:
Interest rates tend to be higher for payday loan remortgages, so bear this in mind when you are putting together your budget. In most cases, the lower your credit score, the higher interest rates tend to be compared to someone with a better score.
Before you remortgage it’s important to be aware of the risks. Defaulting on the mortgage could put your home at risk of repossession. Although it is usually the last resort, it remains a possibility if the loan cannot be repaid in any other way.
Having a payday loan history doesn’t automatically prevent you from remortgaging. Lenders want to know that you are a responsible borrower, so as long as you keep on top of your finances, you may be able to find a mortgage that suits your needs.
Get in touch with the Willows team and we’ll guide you through the process and can offer advice based on your specific situation.
To find out more about how we can help, you can speak with us today by calling 01656 766 158.
If you have a question – we’d be happy to talk to you – simply call us…
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At Willows Finance Ltd, we appreciate that your privacy is extremely important to you. With this in mind, we have put in place a number of measures to ensure that any personal details we obtain from you as a result of visiting this website is processed and maintained in accordance with accepted principles of good information handling and also in accordance with the Data Protection Act 1988.
This statement provides you with details of the type of information we may hold about you, how we obtain and use information and how we protect your privacy.
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Authorised and regulated by the Financial Conduct Authority
Firm Reference Number: 670052
Company Number: 6678545 (Registered in England and Wales)
This document outlines the services we provide. If you need clarification, please contact us at 01656 766158.
We offer first and second charge regulated mortgage contracts for business or personal use.
Other finance options may include:
Regulatory Status:
We offer an advised mortgage broking service and provide enough information for you to make an informed decision.
We are not independent financial advisers. Free debt advice is available from the Money Advice Service.
You can view our privacy policy at: https://willowsfinance.co.uk/privacy-cookie-policy/.
Lenders may also have their own privacy policies which will be provided to you.
We charge a broker fee upon loan completion. The average fee is approximately 5%, depending on your situation.
Fee details:
No refund is offered after completion. You may pay upfront or add the fee to your mortgage. Fees and commission will be detailed in your ESIS and Mortgage Agreement.
You will receive a Mortgage Agreement and an ESIS document detailing:
You may cancel your application anytime before completion without any charge. Mortgages cannot be cancelled after completion.
Missing payments can lead to charges, repossession, and negative impacts on your credit rating.
Consolidating debt may result in higher long-term interest. Securing debt against your home increases risk.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
If you wish to complain, contact us at:
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Tel: 01656 766158
You may be able to refer your complaint to the Financial Ombudsman Service.
We are covered by the FSCS. You may be eligible for compensation of up to £85,000 per person per firm for mortgage advice and arranging.
More info: www.fscs.org.uk
After processing your application, you’ll receive a Mortgage Agreement and have a 7-day reflection period.
Contact us during this period with any questions. To proceed, sign and return the agreement.
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