As a long-term option they offer little benefit to those who use them and they should never be used to manage long-term debts.

The fees and rates of interest generally charged by payday lenders are comparatively high. So, if for some reason you can’t repay the loan in full on payday and have to extend it, those costs quickly escalate.

Your credit score and history plays a big part in a lender’s affordability assessment as part of an application. In turn, multiple payday loans will negatively impact your credit rating. Therefore, these loans could prevent you from being offered a mortgage.

What is a payday loan?

A payday loan provides a small line of credit to an individual who has found themselves short of funds temporarily, often just prior to getting their monthly pay cheque. Usually, this is to cover essential expenses, such as food, rent, bills that are past their due date, or other emergency payments to keep their household running.

Although originally designed to perhaps last a few days, you are now able to borrow for up to 3 months. On top of this, despite the name, there is now also no necessary link to a borrower’s payday.

However, although convenient, a payday loan is also high-risk. This is because the cash is expected to be repaid relatively quickly, and there is no security on the loan. Therefore, the interest rates charged are typically very high.

Can you get a mortgage after a payday loan?

You will be pleased to know that it is possible to get a mortgage after a payday loan. But, it will be more challenging compared to if you had never used a payday loan before.

As mentioned earlier, payday loans are seen as an indication of someone’s inability to manage their money. Therefore, many mainstream lenders will not be willing to aid you in getting a mortgage, due to the uncertainty they have in you making monthly mortgage payments.

Therefore, a specialist lender will be required. These lenders are set up to specifically to support people who have had issues with credit, which means they will be much more accommodating and take a broader view of your circumstances.

What mortgage lenders are available?

If you have used payday loans in the past few years it is likely that you will need to use a specialist lender in order to obtain a mortgage. These lenders will assess all areas of your circumstances, instead of using a checklist to ensure you meet their criteria – like a mainstream lender would.

This means that your more recent financial situation will be looked at, which can prove much more favourable.

When applying through one of these specialist lenders, it’s vital to offer evidence that could support you application. You can look to provide things like proof of repayment and how much was borrowed, as a specialist lender will want to know all of the details involved.

One final thing to note is that these lenders aren’t always directly available to the public. Instead, a mortgage broker will be required to access their services. At Just Mortgage Broker we have relationships with a number of specialist lenders who are ready to help individuals with payday loans.

How to improve your chances of being accepted for a mortgage after payday loans?

To put yourself in a stronger position when applying, there are some steps you can take. Below we have highlighted some of our top tips to help you on your way to getting a mortgage.

• Build a strong credit history – you can take steps to improve your recent credit in order to demonstrate to lenders that you are now in a much better financial position.
• Save for a larger deposit – if possible, providing a larger-than-average deposit will make you a much more favourable borrower. This is because a lender will have to lend less of their money into your property, minimising their risk exposure.
• Consult the support of a mortgage broker – using a broker can not only provide you with tailored expert opinions on your circumstances, but they can also pair you with specialist lenders who aren’t always available to the public.

If you want to discuss your own circumstances, reach out today. One of our expert advisors will be happy to answer any of your questions to help you get started on your mortgage journey.

Why choose Just Mortgage Brokers for your Bad Credit Mortgage?

• This is our speciality – it’s what we do
• Direct access to lenders underwriters enabling us to discuss your situation in detail
• Exclusive deals available
• Broker only bad credit lenders available to us giving you greater choice
• Unlimited mortgage broker – giving a wide range of lenders at our disposal
• Great customer reviews