Payday loan history threatens mortgage applications
Share
Borrowers risk having their mortgage application rejected if they have recently taken out payday loans, regardless of whether it was paid back.
Lender GE Money confirms that it will no longer consider applicants who have taken out a short-term, high-interest loan once in the past three months or more than twice over the past year.
A spokesman for GE Money says: “As a responsible lender in a challenging market we review a range of data to make prudent mortgage lending decisions. Payday loan data is one of many items included in this review and if a mortgage applicant has a current or had a recent payday loan, it is unlikely that we will consider their mortgage application.”
Companies specialising in credit checks have increasingly come under pressure to highlight payday loans on customer credit checks.
Global information company Experian now specifically lists payday loans separately in a departure from the previous practice of providing a more generalised overview of borrowing history.
Experian confirmed that, due to the short term nature of this lending, with many accounts opened and subsequently satisfied within a relatively short period of time, the industry was pushed to call for this information to be presented separately.
It says this information had been available to members of the data sharing scheme Credit Account Information Sharing since earlier this year but would not confirm how many currently request it.
Have you had any clients who’ve had their mortgage rejected as a result of taking out a payday loan? If yes, leave your comment below or email henry.brennan@centaur.co.uk.
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
View results 10 per page | 20 per page
Readers' comments (11)
Mark Nuttall | 10 Jul 2012 11:00 am
Yes, unfortunately however, it was declined about 4 weeks into the application, and after the survey fee had been spent. So one very unahppy client, and not a lot that i could do
Unsuitable or offensive? Report this comment
We're all doomed!! | 10 Jul 2012 11:14 am
I hope your client didn't take out another pay day loan to pay for the valuation, Mark!!
Unsuitable or offensive? Report this comment
Anonymous | 10 Jul 2012 11:34 am
I obtained a successful DIP for a client with Nationwide and submitted a full application - but when the Underwriter looked at the case he declined it - leaving both myself and the client very angry and frustrated!! The client had had a number of payday loans but they had all been repaid within 21 days (or less) of taking them out.
Unsuitable or offensive? Report this comment
Alex | 10 Jul 2012 4:32 pm
to Anonymous | 10 Jul 2012 11:34 am - and this was it's only a DIP and not a full offer!!!
Unsuitable or offensive? Report this comment
Anonymous | 10 Jul 2012 6:30 pm
What is going on here! Good broking is fully understanding your customer and ensuring they can afford their loan - shows the fact finding was a bit limited? Pity we still have brokers stuck in 2006 and moan when the customer is declined rather than following affordability and ensuring correct customer outcomes
Unsuitable or offensive? Report this comment
Anonymous | 10 Jul 2012 7:28 pm
Payday loans are an admission of a struggling applicant by their very nature. If people are having to bridge gaps in finances on a regular basis or in view of mortgage applications then I'm not surprised GE take this action. It should be built into the dip assessment though to be fair.
Unsuitable or offensive? Report this comment
Anonymous | 10 Jul 2012 9:14 pm
Let's be honest, if someone can't make their pay last til the end of the month, should they really be taking on a mortgage?? Looks like an arrears case waiting to happen!
Unsuitable or offensive? Report this comment
Anonymous | 10 Jul 2012 9:15 pm
Let's be honest, if someone can't make their pay last til the end of the month, should they really be taking on a mortgage?? Looks like an arrears case waiting to happen!
Unsuitable or offensive? Report this comment
Anonymous | 11 Jul 2012 9:04 am
Yes Natwest declined my client who unfortunately had taken out 1 payday loan a few months before coming to see me (to improve credit rating as had no other loans) yes i know..
Natwest then declined case.
Fortunately did not cost client any monies at all and we are hoping to replace shortly as now paid off.
Unsuitable or offensive? Report this comment
chris gardner | 11 Jul 2012 3:07 pm
Its easy to sniff at somebody who has used a wonga style deal, but what if the new mortgage is much cheaper than the existing? Its not out of the realms of reality to halve your monthly payments by remortgaging.
Some of the so-called advisors jumping to conclusions here need to look at themselves before critisising.....know your customers???
Unsuitable or offensive? Report this comment