Can Payday Loans Destroy Your Chances of Buying a Home in the UK?

If you're hoping to apply for a mortgage loan in the UK, having a backlog of payday loans to repay may reduce or even eliminate your chances of getting approved. According to a UK news report, individuals who have availed of multiple payday loans are perceived as unreliable applicants for mortgage loans. The Invisible Link Between Credit History and Mortgage LoansStatistics indicate that ever since the UK economy experienced a downturn, as many as 3 million UK residents have applied for payday loans at one time or the other. However, it's common to find that such applicants are frequently turned down for mortgage loan approvals as they are understood to be risky investments. Banks and other private lending institutions share their data on customers with credit referencing agencies which in turn track the credit history of any given individual. In November 2013, the BBC conducted a research on mortgage brokers which revealed that more than 60% of mortgage brokers had turned down loan applicants who had a history of taking out too many payday loans. Well-known UK payday loan lender Wonga challenged the contents of the report asserting that customers enjoyed an improved credit rating after borrowing and repaying a loan from them. Rising tendency to Reject Applicants with Outstanding Payday LoansA spokeswoman speaking on behalf of the Halifax Building Society said that their mortgage lending section did not discriminate against applicants who have availed of payday loans. She reiterated that as mortgage lenders, the Lloyds Group treated payday loans on the same footing as any unsecured loans such as credit cards. The spokeswoman for Lloyds explained that those applicants who still had more than three months of outstanding payments on their payday loans were assessed for affordability before approving a mortgage. Kensington Mortgages and GE Money (both UK based mortgage agencies) automatically reject applicants who have outstanding payday loans. Associate Director of Broker London and Country, David Hollingworth, admitted that lending agencies want to protect their financial interests and use credit referencing agencies to assess the risks associated with a mortgage applicant. He also said that lenders who usually disregard credit ratings do not prefer applicants with payday loans because it reflects poorly on the stability of the borrower. Founder of the Consumer Action Group, Marc Gander, is of the opinion that consumers should be made aware of the fact their chances of getting a home mortgage approved could be ruined if they use a payday loan.