How They Affect Your Application

Payday loans are one of the most common reasons mainstream lenders decline mortgage applications — even if the loan was small or repaid years ago. Many high-street banks will not accept applicants who have used payday loans recently, but specialist lenders often take a more flexible view depending on how long ago the loan was taken and your overall credit profile.

This guide explains how payday loans impact mortgages, what lenders look for, how long you should wait before applying, and what to do if you’ve used a payday loan in the past.

Do Payday Loans Affect Your Ability to Get a Mortgage?

Yes — payday loans can affect mortgage approval, but how much depends on timing and your wider credit history.

General lender approach:

• Payday loans in the last 12 months: High chance of decline with mainstream lenders.
• Payday loans 12–24 months ago: Some lenders may consider.
• Payday loans over 2 years old: Many lenders no longer treat them as critical.
• Multiple payday loans: Specialist lenders only.

If you also have defaults or CCJs, see: Mortgages After Defaults or Mortgage With CCJs.

Why Do Lenders Dislike Payday Loans?

Payday loans are seen as a sign of short-term financial instability. Even if repaid on time, lenders may assume a borrower was struggling to manage expenses, which introduces risk.

Key concerns for lenders:

• Evidence of financial stress
• Potential for future reliance on high-cost credit
• Higher incidence of missed payments in payday loan users

The more recent the payday loan, the more cautious lenders become.

How Recent Is the Payday Loan?

• Payday loans in the last 6 months: Very likely to cause a decline; even specialist lenders may hesitate.
• Payday loans 6–12 months old: Some specialist lenders available; higher deposit or interest rate required.
• Payday loans over 12–24 months old: Wider lender choice; key factor becomes your overall stability since the loan.
• Payday loans older than 2 years: Often ignored by many lenders; treated as part of historical credit, not recent risk.

Does It Matter If the Payday Loan Was Repaid On Time?

Yes — repaying on time helps, but the presence of the payday loan itself is still a negative marker. Mainstream lenders still often decline even if it was fully repaid without issue.

Specialist lenders, however, place more importance on:

• How long ago the loan was taken
• Whether your finances have improved since
• Whether you have other forms of adverse (defaults, CCJs, arrears)

Deposit Requirements If You’ve Used Payday Loans

• Recent payday loan (< 12 months): Typically 15–25% deposit.
• 12–24 months ago: 10–20% deposit.
• 2+ years ago: Standard deposit levels may apply (5–10%).

For general rules, see our Deposit Requirements Guide.

Affordability & Bank Statement Scrutiny

Affordability itself is rarely reduced by payday loans — but lenders will scrutinise your bank statements more closely. They check for:

• Gambling transactions
• Unarranged overdrafts
• High-cost credit usage
• Large debts on credit cards

Full affordability breakdown is here: How Much Can I Borrow?

Remortgaging After Using Payday Loans

Remortgaging is possible, but mainstream lenders may decline if the payday loan is recent. If your product is ending soon, consider whether a product transfer may be safer.

Useful resources:

• Product Transfer vs Remortgage
• Remortgage Timeline

How To Improve Your Chances

• Let at least 12 months pass since the payday loan.
• Avoid any new credit applications.
• Ensure no missed payments across all accounts.
• Build a stable pattern of income & expenditure.
• Save a larger deposit.
• Fix any errors on your credit file.

Next Steps

It is absolutely possible to get a mortgage with payday loans on your record — especially if they are older than 12–24 months or were repaid cleanly. Lenders assess payday loan history very differently, so choosing the right lender is critical.

You can also explore related guides such as Mortgage After Defaults, Mortgage With CCJs, and use our mortgage calculators to estimate your borrowing power.

All mortgage advice is provided by FCA-regulated advisers. Your home may be repossessed if you do not keep up repayments on your mortgage.

FAQs

Can I get a mortgage with a payday loan from last year? Yes — but likely with a specialist lender and higher deposit.

Do payday loans automatically lead to decline? No — but many high-street lenders treat them as high risk.

Does repaying the payday loan help? Yes — it shows responsible behaviour, but timing still matters.

How long should I wait after a payday loan before applying? 12 months is the minimum for a healthier set of options.

Can first-time buyers get a mortgage after payday loans? Yes — with the right lender and deposit level.