Getting a Mortgage with a Payday Loan is Possible

Here’s what your approval will hinge on

Payday loans don’t automatically disqualify you for a mortgage. However, they will limit your access to the pool of existing lenders (and the deals they offer).

How limited your options are will be determined entirely by the specifics of your payday loans and your wider situation. Every lender and every person is unique.

There are over 100 mortgage lenders in the UK, and your situation could mean that:

• Only a handful of those lenders won’t accept you
• Only a handful of those lenders will accept you

It’s more likely to be challenging for you if…

1. You have a recent payday loan. Especially if it was within the last 6-12 months.
2. You’ve had multiple payday loans. Evidencing a track record of payday loan usage can make lenders think you’re more likely to have difficulties managing your finances.
3. Your payday loans weren’t repaid on time. Again, the lenders see this as indicating that you struggle to manage your finances.
4. Other credit issues. This can make things much more difficult as this is a potential signs of financial distress.

Your payday loans can affect other parts of your mortgage application too

Like with other types of bad credit, due to the perceived additional risk, lenders can increase their minimum criteria thresholds for other things.

Some examples below:

• Lenders could require a higher minimum deposit. 
• They could also require higher earnings. Loan-to-income ratio minimum requirements may increase so that they can feel more confident in your ability to afford it.
• They could be more picky about what type of income you earn. If you’re not a straightforward, long-term PAYE employee, that could be problematic with some lenders.

The lenders lack of clear, unambiguous policies can be frustrating

Here’s the thing: Lender policies tend to be a lot less black and white with payday loans. This isn’t only true for borrowers but also for many brokers.

In other circumstances, lenders have much clearer acceptance criteria. But with payday loans, you’ll often read things in their policies like “refer to underwriter,” “case-by-case basis,” and “subject to credit checks.”

When you have payday loans, lenders can be a bit like people

They each have their idiosyncrasies and quirks. Unless you deal with them very regularly, they’ll be very hard to predict.

Even if you start with the best match on paper, you could face rejection and need to go through the full application process repeatedly as you work your way down the list from top to bottom.

Because it is often a case-by-case, underwriter decision, you’ll often have to wait until the very end of the application process to find out.

Every misstep risks another rejection on your credit file, making things even harder the next time. Worse still, you may miss a deadline for a property purchase.

You don’t have to figure this out alone

Finding the best possible mortgage after a payday loan can feel complicated, but it’s not something you have to tackle by yourself.

With the right approach and the right advice, you can ensure you get the best possible outcome without any of the stress.

This is what we’re here for

Our bad credit experts help people in situations just like yours every day. Because they’re deeply familiar with the patterns behind lenders’ decisions, you remove the risk of stress, wasted time and unnecessary rejections.

We understand how lenders behave behind the scenes and know how to match you with those who will give you a fair shot.

You can get all of the clarity you need, quickly, from a hand-selected OMA bad credit expert.

Because they regularly and repeatedly help people with payday loans, they can quickly establish the best lenders that will actually give you the mortgage, what the requirements will be and at what rates.

Are payday loans the same as bad credit?

Not exactly, but many banks and building societies still treat them similarly when it comes to mortgage applications. Hence, payday loan customers are triaged to our specialist bad credit mortgage advisors.

Even if you’ve never missed a payment, the presence of payday loans on your credit file can raise a red flag for many lenders. They often see it as a sign that you might struggle to manage your finances or live more hand-to-mouth than they’d like.

That’s why working with a bad credit mortgage expert is still so important.

Even though payday loans aren’t technically “bad credit,” many mainstream lenders act like they are. Having someone on your side with day-to-day experience of how different lenders interpret payday loan history can make all the difference.

For some lenders, a good explanation for the payday loans can make the difference

Some lenders will be willing to listen if you have a reasonable explanation for why you needed payday loans.

Context matters. A short-term cash flow issue 3 years ago, caused by something like an unexpected car repair or a temporary drop in income, with an otherwise squeaky clean history, can be very different to a long-term pattern of financial difficulty.

Some lenders are more open to hearing your story, especially if you can show that things have changed, and your financial management has been solid ever since.

This is where an experienced broker can help you build the best case to present to the right lender, giving you a better shot at getting the mortgage you deserve.

Compare rates and policies from mortgage lenders that will consider payday loans

If you’re early on in the process and want an idea of what rates and repayments you might be looking at, our comparison tool is perfect for you.

It shows you live mortgage rates, available lenders, and even a glimpse of each lender’s policy approach (shared with brokers) – including how they typically view things like payday loans.

To get the most accurate results, make sure you personalise your search based on your situation. Please adjust the mortgage type, loan amount, and deposit size to match reality.

This helps narrow the list of possible lenders further.

Compare payday loan mortgages