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Mortgage Risk with Payday Loans

A recent survey carried out by Trade Publication Mortgage Strategy has shown that taking out a payday loan could endanger people’s chances of getting a mortgage whether or not they have difficulties repaying the cash.

Apparently nearly two thirds of brokers contacted by Trade Publication for the survey had a client turned down for a mortgage after a payday loan.  It has come to light than many mortgage applications have been instantly declined and credit scores adversely affected after people took out payday loans.  The trade body that represents payday lenders, The Consumer Finance Association, said it would look at whether customers should be warned about the consequences before they take out  one of these loans. A record of a payday loan will remain on a credit record for nearly six years.

This revelation comes as the Government has just announced that it is to introduce a new law to cap the cost of payday loans. Some payday lenders have been criticised for charging more than 5000% annual interest. The level of the cap, which has not yet been announced, will be decided by the new industry regulator, the Financial Conduct Authority (FCA). The Business Secretary has indicated that future advertising will also require payday loan companies to make clear that borrowers have to seek debt advice.

It is therefore extremely important that you seek advice about any debt issues you have before taking any risks which may affect your future borrowing ability.