Payday loans could cost you a mortgage
The Telegraph, 12 Jul 2012
Borrowers who have used payday loan companies are in danger of permanently blighting their credit rating. Mortgage provider GE Money this week announced that it would not process home loan applications from consumers who had taken out short-term high-interest loan in the past three months or more than twice in the past year.
Credit rating agency Experian has also taken steps to identify those who rely on payday loans. In the future, Experian will list payday loans separately in an individual's credit report instead of grouping the short-term loan in with other borrowing needs.
A spokesman for GE Money said: “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.”
Loan providers such as Amigo say that the development is positive and that consumers should be educated as to the dangers of payday lending. Amigo Loan's founder James Benamor, said: “While it is not fair that banks have stopped lending to good people, consumers need to be made aware that there are other safer and cheaper options beyond payday.” This is the strongest sign yet that other financial services providers are recognising the ‘hit and run’ effect that payday lending has and the destabilising risks it brings. Last month it was revealed by Scottish Widows that twice as many 18 to 34 year olds had taken out a payday loan in the last year than the previous 12 months.
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