Right or wrongly, Payday loans get a bad rep. Now, as someone who has never used one or knows anyone that has, it’s difficult for me to have an opinion. They are many that condemn the payday loan providers as vultures, charging huge sums of interest to the financially vulnerable, while others champion the services as a helpful alternative to unauthorised overdraft charges or credit cards.
That aside, there’s now a different reason to avoid them….right at the time when they are most popular.
Experian, the mammoth credit rating agency, are now categorising payday loans separately from other types of borrowing, which means it could seriously damage your credit rating, and your ability to obtain credit or a mortgage. This is because banks have added payday loans to their ‘fatal criteria’, which could see your mortgage application automatically rejected.
Again, rightly or wrongly, payday loans are massively popular as folk try to make their wages stretch to the end of the month or for helping out with the cost of Christmas. So if you’re thinking about taking one out to help out in December, consider the long term and how it will affect it’ll have your ability to borrow in the future.
It’s important that you carefully consider the long term implications of borrowing money from a payday loan provider. Firstly, as it may be cheaper to borrow money through other means, and now secondly as it may affect your ability to get a mortgage.