The possible impact of a Payday Loan

We have all seen the adverts offering quick and easy money for those times when your wages are running short and an unexpected cost appears. The idea of getting money straight to your bank account with a couple of clicks makes getting a payday loan seem an appealing option. However, are there long-term implications of taking out a payday loan?

If you look on the internet there seems to be no firm yes or no answer, but it also important to consider the two parts to this question. The first part is what impact will a payday loan have on your credit score and the second question, will having a payday loan stop you from getting a mortgage.

Will having a payday loan impact my credit score?

Yes is the simple answer. Whether it will have a good impact or a bad impact will depend on you. Each time you apply for credit a search is performed and will leave a mark on your credit report, too many searches can impact on your ability to get credit. From a lenders perspective, it can appear that you are desperate for funds and experiencing financial difficulty making you a high lending risk.

If you take a Payday loan out for a one-off emergency it is unlikely according to Experian to have a detrimental impact on your credit score ( In fact, borrowing money and paying it back on time could actually help improve your credit score as it shows that you can borrow money and repay it.

If you do not repay in line with the loan agreement then it is highly likely that this will have a negative impact on your credit score. Missed payments and late payments will cause your credit score to go down and will make lenders less inclined to lend you money in the future.

Will having a payday loan stop you from getting a mortgage?

The answer to this is not quite so simple. For some lenders, any form of short-term lending or payday loans on your credit file will mean they will decline your application regardless of how you managed the commitment. Then there are some that will give you a mortgage while there is a payday loan showing on your credit report, however, they may stipulate that it must have been repaid at least 3,6 or 12 months ago.

It would appear to be that lenders are wary of people that have previously taken out a payday loan because it potentially shows an inability to manage your money effectively. This would be especially true where there are multiple payday loans showing. If you have needed to use payday loans then it is important to have a clear reason as to why that situation has occurred. For example a large unexpected bill for your car which you need in order to work.

If you are able to justify the loan and it is a one-time occurrence and your credit score is good then it is unlikely that it will cause you a serious problem in getting a mortgage. However, you should bear in mind that it could have an impact on your application and therefore it is important to make sure you disclose your credit history fully to your mortgage adviser.

Please note Stoneygate Mortgages Ltd does not offer Payday loans and can offer no advice on Payday loans. The information in this post is accurate at the time of posting however, lender criteria can change.

Content was accurate at point of publication and is subject to change

Are you on the Standard Variable Rate?

You know what it’s like, you spend hours sorting out your mortgage, and weeks waiting for it to come through. However, once you have the mortgage in place how often do you review it? Those who are conscientious will probably have a note in their diary, if you used a broker you can guarantee they will be in touch when your introductory rate ends or you could always rely on the lender to let you know.

What happens at the end of your introductory rate?

If you don’t do anything at the end of your introductory rate you will go onto the lenders standard variable rate. This is a rate set by the lender, which tends to follow changes in the base rate. That being said, unless it is directly linked to the base rate the lender could choose to change their standard variable rate at any time and by any amount.

Is it bad to be on the Standard Variable Rate?

That depends on your circumstances, a recent study by L&C has estimated that more than 4 million households are wasting on average £216 per month by staying on their lenders standard variable rate. If you are one of these 4 million then it would suggest that for you, it is a bad thing to be on the Standard Variable rate.[1]

If your mortgage amount is quite low and has a relatively short period of time then it may be best to stay on the standard variable rate and changing your mortgage may not be cost effective if there are fees involved.

What are the options?

There are a number of options open to you once your introductory rate has ended, although it is important to note that some of these options can take a while to put in place so it is best to review your mortgage a few months before your rate actually ends.

  • Remortgage – move your mortgage to a new lender. This gives you the opportunity to search the mortgage market for the best deal. It also gives you an opportunity to make changes to the mortgage such as borrowing more for home improvements or changing the mortgage term to pay it off quicker.
  • Product Switch – keep your mortgage with your current lender but ‘switch’ on to a new product with them which will generally offer you a better rate than staying on the standard variable rate.
  • Do Nothing – In some cases this can be the right option depending on your circumstances.

However, according to the Citizens Advice bureau 83% of people currently on the standard variable rate would be better off if they switched to a new deal![2]

To find out if you could save on your current mortgage please contact me at

Sourcing – [1]
Sourcing – [2]

Content was accurate at point of publication and is subject to change

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. For mortgage advice our broker fee is £195 which will be payable on application. Stoneygate Mortgages Ltd, registered in England at 19 Warren Park Way, Enderby, Leicester, LE19 4SA (Company Number 10689309). Stoneygate Mortgages Ltd is an appointed representative of First Complete Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN: 435779) for mortgage and non-investment insurance advice. The Financial Conduct Authority does not regulate some forms of Buy to Let.

You insure your car, why would you not insure your lifestyle?

You don’t think twice about taking out car insurance or building insurance because there is a legal requirement to have it; but what about your life, your lifestyle, your family. Why would you not protect that as well?

Most people when they are taking out a mortgage only think about getting that dream property or being able to save some money on their mortgage payments. Thinking about the future and what could happen if you were to die or be unable to work tend not to be high on the list of priorities.

But it should be.

Every 2 minutes someone in the UK is diagnosed with cancer[1], 1 in 600 people are living with MS[2],  every 3 minutes someone in the UK is struck by a heart attack and Stroke causes around 40,000 deaths a year[3].

Having Life cover is a start as it will mean that there will be a lump sum paid out if you were to die, but what would happen if you survived? The survival rate for breast cancer in Leicestershire is 95.1[4]* which is great news, but what would happen during the treatment and recovery period. Would that income you have been using to pay your bills be affected? How would the family cope financially?

There are many different types of cover you can take out to protect you and your family should the worse happen.  There are four main types of cover that are available Life cover, Critical Illness Cover (CIC), Income Protection and Family benefit.

Life Insurance – will provide a lump sum in the event of death.

Critical Illness Cover (CIC) –  will provide a lump sum if you were diagnosed with a critical illness. This list will be dependent on the type of cover and the provider.

Income Protection – will replace a proportion of your salary if you are unable to work due to accident or sickness.

Family – designed to look after your family’s living costs and can provide a way of ensuring that your family can maintain the lifestyle you want for them whether you are around or not.

By working out what is important to you and what your concerns are and working with someone like me you can get a tailored Protection Portfolio, to support both you and your family at a time when you should not have to worry about your finances.

For more information and to set up your own Personal Protection Portfolio please contact

[1] updated 08/05/2017

[2] updated 30/09/2016

[3] updated 03/07/2017

[4] updated 08/05/2017

Please note for these insurance products terms and conditions apply. This information is a summary only. You will receive a full policy document upon application. This policy will set out the terms, conditions and limitations of cover provided under the plan.

Stoneygate Mortgages Ltd is an appointed representative of First Complete Ltd.

[1] updated 08/05/2017

[2] updated 30/09/2016

[3] updated 03/07/2017

[4] updated 08/05/2017

Content was accurate at the point of publication and is subject to change