If you’ve taken out a short term loan from a payday advance provider any time in the last three months, choose your mortgage lender with care – reports have emerged that more and more home lenders are using payday loans as an excuse to reject your loan application.
The latest mortgage lender to weigh in on the subject, GE Money Home Lending, has announced that any applicant that has taken out any instant cash loans over the last three months will be automatically rejected. Additionally, if you’ve taken out two payday loans or more over the last 12 months, you’ll also not be eligible for a loan from GE Money – even if you repaid the loan on time and without incurring any late fees.
Other lenders have also stated that an applicant with payday lending activity on their credit record may have a lessened chance of having their mortgage application approved. Taking out instant cash loans from a payday lender is considered an indicator of possible financial distress by these lenders, experts say; the irony that many borrowers feel the need to turn to payday lenders after being precluded from traditional forms of credit seems to be lost on those banks and building societies that have turned their noses up at prospective borrowers with a history of using payday lending.
It is true that repeatedly taking out payday lending is an excellent way to end up in unmanageable debt, especially since these loans carry incredibly high interest rates and the penalties for missing your repayment date are punitive to the extreme. However, experts say that people who use payday lending regularly are not thinking about taking out mortgages; people that are otherwise financially healthy but encounter an unforeseen, expensive emergency a week before their next pay date once or twice a year are much more likely to be impacted negatively by lenders looking down on their payday lending activity.