Past borrowing. Your next home.
Mortgage after payday loans
Used a payday loan and now planning to buy or remortgage? Count Ready can help you understand which details need checking before you make a mortgage application.
Previous payday borrowing can restrict your options, including when it was repaid on time. Acceptance depends on the lender’s criteria and your full circumstances.
By Count Ready · Updated
Can you get a mortgage after using payday loans?
A mortgage may be possible, but repaying a payday loan does not guarantee eligibility. Lenders can take different approaches to its age, frequency and repayment history. A lender also needs to establish that the proposed mortgage is affordable.
Payday loans are short-term, high-cost borrowing. A payday loan can appear on your credit report even when repaid on time. Using one does not automatically mean you missed payments or have a default. Those are separate details which matter when an adviser checks your case.
An older, settled loan
Find the opening and settlement dates and evidence of repayment. Explain what has changed since that borrowing. An older account still needs to be considered against the lender’s questions and policy.
Recent or repeated borrowing
List each loan, including overlapping loans, extensions and money borrowed to repay another loan. The assessment needs to establish whether a past shortfall has ended or is continuing.
A loan is still outstanding
Include its balance and payment schedule in your budget. Discuss both the commitment and the lender’s eligibility rules before applying. Clearing it immediately may not resolve every concern about the history.
Payments are difficult now
If you need borrowing to cover existing repayments or essentials, speak to the creditor and seek free debt advice. A mortgage application is not a substitute for addressing an unaffordable budget.
Background: MoneyHelper: payday loans and mortgage applications (opens in a new tab).
Build a short record of the borrowing
For each loan, make a note of:
- The provider and type of agreement.
- The amount borrowed and date it started.
- Any further borrowing, extension or repayment arrangement.
- The final repayment date, or balance still due.
- Any late payment, default or disputed entry.
Add a brief factual explanation of why you borrowed and how you manage that expense now. Avoid guessing a settlement date from the month of the last bank payment if the account shows something different.
Check the account status and reporting dates
A settled credit account normally remains on a credit report for six years from settlement or closure. For an account recorded as defaulted, the usual period runs from the default date instead. Neither is simply six years from the day you first borrowed.
Check the provider name, balance, status and dates. If information is inaccurate, raise it with the credit reference agency or the organisation supplying the entry and keep the evidence. Accurate borrowing history is not removed just because it makes a mortgage harder to obtain.
Get your credit reports (opens in a new tab) before the discussion, and use our mortgage with defaults guidance (opens in a new tab) if a default is also recorded.
Sources: Experian: understanding credit information (PDF) (opens in a new tab) and default reporting (opens in a new tab).
Work out an affordable payment and deposit
Start with income you can evidence, essential spending, dependants and all regular debt payments. Allow for the costs of the proposed home, such as council tax, insurance and any service charge. Tell the adviser about expected income or spending changes.
A larger deposit reduces the amount you need to borrow, but does not cancel a lender’s credit-policy restrictions. Explain where the funds came from and whether a family contribution is a gift or a loan.
Keep money for legal work, surveys, moving and applicable property taxes. Do not take new borrowing to inflate the deposit or improve the appearance of your finances.
How your mortgage plans change the discussion
First-time buyers
Have your borrowing history assessed before relying on a purchase budget or committing to a deadline. A family deposit does not remove the need to assess your own income and credit record.
Home movers
Do not assume you can transfer your existing mortgage to another property without assessment. Explain the new price, any extra borrowing and the payday loans taken since your last mortgage application.
Remortgage customers
Compare a new lender with any suitable deal available from your current lender. Checks depend on the transaction and provider. Taking extra secured borrowing to clear payday debt can put your home at risk and increase the total cost over a longer term; seek debt advice before pursuing consolidation.
Explore remortgage options with bad credit (opens in a new tab)
Joint or self-employed applicants
For a joint application, provide both applicants’ records. A partner’s stronger history does not erase yours. If self-employed, explain personal borrowing alongside trading income and business cash flow, with the accounts or tax evidence the adviser requests.
Declined after payday loans? Check the reason first
Ask the lender or adviser what explanation can be provided. The issue might concern the loan history, affordability, another credit entry or the property. Keep any correspondence and avoid assuming that every lender will reach the same decision.
Credit reports record searches, not a separate marker saying a mortgage was rejected. Several hard searches close together can affect future credit applications. Ask whether a proposed check is soft or hard before authorising the next step.
Read Experian’s explanation of credit searches (opens in a new tab) and what a mortgage refusal means (opens in a new tab).
Payday loans and mortgages: common questions
Can one payday loan stop me getting a mortgage?
It can affect the decision, even when repaid on time, but it does not establish the outcome with every lender. Provide the agreement, borrowing and repayment dates, and explain whether it was isolated or part of repeated borrowing. The lender must also assess your present finances and the property.
Can I apply if I used a payday loan in the last 12 months?
Recent use needs a check against the proposed lender’s current policy. There is no twelve-month anniversary that guarantees acceptance. Ask the adviser which dates the policy uses and whether your circumstances can be considered before proceeding with a credit search.
Will paying off the loan remove it from my credit report?
No. A settled account normally remains for six years from settlement or closure. A defaulted account has a different timeline, normally six years from the default date. Check the status and dates on the actual entry; repayment does not erase accurate history.
Should I use a payday loan to improve my credit score?
No. Taking expensive short-term borrowing for this purpose creates a repayment commitment and can make mortgage assessment harder. Paying an existing account on time does not mean that taking out another loan will help you qualify. Focus on affordable payments and accurate records.
Are instalment loans and salary advances always treated as payday loans?
Do not classify borrowing solely by its brand name or repayment length. Show the adviser the agreement and how it appears on your credit report and statements. Different products have different features, and the proposed mortgage lender needs to confirm how its policy applies.
What if I took a payday loan after receiving an agreement in principle?
Tell your adviser before progressing. New borrowing can change affordability and the lender’s assessment. An agreement in principle is not a mortgage offer, and changes can also matter later in the application. Do not assume an earlier check covers the new commitment.
Discuss the history before the next application
Tell us when you last borrowed, whether the loans are repaid and whether you want to buy, move or remortgage. We can explain what needs checking.
Count Ready is a mortgage broker, not a lender. Confirm the service scope and full fees before chargeable work. An enquiry is not confirmation that a lender will accept your application.
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Your home may be repossessed if you do not keep up repayments on your mortgage.