You have decided to buy an apartment or a house, but you are afraid that your previous loan could have an impact on that? You are right! If you have used or are still repaying payday loans, such a loan could be an aggravating circumstance when obtaining a mortgage. Some people even fear that they will be rejected for a mortgage in case they have been using payday loans. So let’s see where the truth lies.
What Are Payday Loans And How Can They Impact A Mortgage?
Although most people have tried a payday loan model at least once in a lifetime – many of them are still not familiar with all the details. This can sometimes cost you dearly, so we will repeat some basic things you need to know. So what is a payday loan anyway? It is a short-term loan that can come in handy to cover some current and unforeseen expenses that have happened to you. They should be paid until your next paycheck or any other income you earn. Very convenient isn’t it? Especially if you find yourself in an acute and short-term financial problem. However, what many people are not aware of, is the fact that these loans are not as simple and easy-going as they may seem at first glance. Namely, this is certainly not a loan for those who don’t have regular incomes, because it can be difficult to repay in that case – and in that case, it can cost you a lot. Whether payday loans affect your getting a mortgage – depends on the situation. First of all, whether you are a regular paying customer or not. However, this also depends on the lender when you want to get a mortgage. So what can we expect?
You Want To Get A Mortgage After A Payday Loan – What Can You Expect?
As we have already said, many of us have found ourselves in a situation of using a payday loan. It happens that sometimes you urgently need a short-term loan to repair a car, or repair a heater. However, it is important to repay the payday loan according to the established rules – so that you do not fall into a financial abyss. In addition, even when you are a regular payer – this type of loan could have an impact on getting a mortgage. How and why? According to SpeedyCash, payday loans generally do not prevent you from getting a mortgage. However, we cannot say that they do not influence at all. Even though payday loans do not affect your mortgage application – they do affect the process of obtaining the mortgage.
Namely, if you have been using a payday loan in the last six years – you should know that this information will remain recorded in the credit bureau, even if you have repaid everything according to the agreement. In that case, when you want to get a mortgage, lenders may be suspicious of you. Such an attitude usually results in significantly reducing the value of the mortgage – and your request may even be denied. Therefore, if you are planning to buy a house in the near future – keep this fact in mind if you have used a payday loan.
Your Chances To Get Mortgage After A Payday Loan
Perhaps you are wondering can you even get a mortgage after a payday loan? Fortunately, the answer is YES. You need to know that any loan you have used and listed in the credit bureau may have an impact on your mortgage. In that way, a payday loan is not much different from other types of loans that you may have used. Certainly, future potential lenders view some parameters as decisive in deciding on granting a mortgage loan. First of all, it will look at how you managed your previous debts – and whether you were regular in paying and settling debts. They will also take into account how this has affected your debt-to-income ratio. Why is this important for approving a mortgage? A mortgage is in itself a long-term financial obligation, and if you have missed payments for smaller amounts in the past – there is little chance that you will be able to obtain a mortgage. Even if you succeed, it will be at a significantly higher interest rate. However, if you paid off all your debts on time, then it had a positive effect on your credit rating – and that gives you a very good chance of getting a mortgage.
What If You Are Currently Repaying Your Payday Loan?
If you have already applied for a payday loan and in the meantime wanted to apply for a mortgage – do not despair. The best thing you can do is to repay your payday loan on time – and under the conditions provided. So, the most important thing when getting a mortgage is having a good credit history and sticking to regular repayments.
You Can Improve Your Chance For A Better Mortgage
We have already explained that the most important thing is to have a good credit history – and to pay all your debts regularly. In this respect, a payday loan is no different from other loans. However, if you want to take out a mortgage, and these things worry you – you may want to try some other strategies to increase your chances of getting a mortgage. First of all, dedicate yourself to good preparation for obtaining a mortgage. This involves thoroughly checking your credit lines and all the reports. See if any unresolved issues may be holding you back from getting a mortgage – and try to resolve those issues before applying for a mortgage. Sometimes it is far wiser to wait for your credit rating to improve – than to rush things and lose your mortgage option. If you are still repaying some debts, try to increase the payment amount – as this will affect lenders who will not see you as too much of a risk. You mustn’t take out a mortgage too early before you are financially ready. Otherwise, buying a property will not be a pleasure for you – but a great burden that could drag you to the financial bottom.