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Payday loan history threatens mortgage applications

Borrowers risk having their mortgage application rejected if they have recently taken out payday loans, regardless of whether it was paid back.

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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.

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  • Sub Prime Kaboooooom 12th July 2012 at 12:53 pm

    Bottom line none of us know the full details of any of the cases.

    There could be no savings whatsoever or a totally different financial position for the borrower.

    In my experiance Payday loans are a clear indicator of severe financial hardship……..you simply do not borrower at 7000% APR if you have no other option.

  • chris gardner 11th July 2012 at 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???

  • Openwork AR 11th July 2012 at 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.

  • Anonymous 10th July 2012 at 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!

  • Anonymous 10th July 2012 at 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!

  • Barrie 10th July 2012 at 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.

  • Good old days 10th July 2012 at 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

  • Alex 10th July 2012 at 4:32 pm

    to Anonymous | 10 Jul 2012 11:34 am – and this was it’s only a DIP and not a full offer!!!

  • Bob Woodmansee 10th July 2012 at 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.

  • We're all doomed!! 10th July 2012 at 11:14 am

    I hope your client didn’t take out another pay day loan to pay for the valuation, Mark!!

  • Mark Nuttall 10th July 2012 at 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