A new trend could start that sees people who have borrowed money from payday loan services being turned down for their mortgage applications.
GE Money Home Lending has started to reject mortgage applications from anyone who has borrowed money using payday loans in the last 3 months, or who has had 2 or more payday loans in the past year. This is even applying to those that have paid off their loans in full.
The move by GE Money, who operate through brokers could be quite detrimental to many people who use short term loan services as convenient way of borrowing money between paydays.
A GE Money spokesman said: ‘As a responsible lender in a challenging market, we review a range of data to make prudent mortgage lending decisions. If an applicant has a current or had a recent payday loan, it is unlikely we will consider them.’
Chief executive of the Consumer Finance Association, John Lamidy, said: ‘the simple fact of taking out a payday loan isn’t a sign of anything other than you needed some money for a short period.’
The Consumer Finance Association is a trade body for payday lenders. Payday loans are a growing trend in the UK as people shy away from banks. Interest rates can be quite high on payday loans but there are often only for up to a month. The loans are far more accessible to users who may have difficulty getting credit through their banks.