Finance and Career Magazine: Is taking a payday loan going to ...

Creasy, who has been vocal in the past calling for regulation of UK payday loan lenders says the move is further proof that payday lenders are damaging UK consumers' credit worthiness. She says the fact that GE Money will be using payday loan borrowing as a benchmark to disqualify mortgage applicants is further proof that these loans cause households to run into debts in these tough economic times.

She slammed the Government for its lack of interest in regulating UK payday loan lenders and termed the action as "unforgivable". With millions of UK consumers applying for these loans to make ends meet, the Government has enough clout to reign on payday loan lenders and regulate the amount of interest that consumers are charged.

However, while GE Money has taken a firm decision regarding payday loan borrowers, the other five largest mortgage lenders in the UK are not following the firm's steps. The top five biggest mortgage lenders ruled out automatically disqualifying applications who have previously taken short term cash loans.

Royal Bank of Scotland, Lloyds, Santander, Nationwide and Barclays do not currently screen applicants although some of them carry out manual reviews if a borrower's credit history contains more than one payday loan.

UK consumers may now have to take conscious steps to find ways to make ends meet through other means apart from taking payday loans. With last week's development, it is only a matter of time before more lenders institute tighter credit rules on customers who have taken payday loans in the recent past.

Analysts point out that GE Money's move is likely to be adopted by other lenders in the coming months. This is drawn from the fact that Experian UK has now started listing payday borrowings separately in the credit report. Previously, payday borrowings were included together with other borrowings.

Financial advisers are saying customers need to look beyond payday lenders if they want to repair their credit. Long term low interest loans are a great alternative for borrowers who can qualify for the loans. Consumers with poor credit may have to moonlight or use other ways to get extra cash to get by.

Source: http://www.financemagazineonline.com/2012/07/is-taking-payday-loan-going-to-hinder.html

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