As a potential payday loan borrower, it would be advisable that you consider your chances of qualifying for a mortgage, getting affected by short term loans. Short term financing, no doubt, aids you in meeting your urgent cash needs, but since it is primarily associated with bad credit borrowing and high rate of interest, you might as well find it difficult to qualify for mortgage loans later. Let’s discover more on how short term financing works and ways in which it can impact your chances of securing a mortgage.
Let’s go through its features in a bid to understand its workings further:
- They can be secured easily by borrowers with bad credit.
- They involve a fast approval process whereby on approval the money will be credited in to your account within 24- 48 hours
- The rates of interest associated with short term financing are very high and in case of a default or a rollover, the rates accumulate very fast with the expenses spiraling out of control.
Do They Affect You Credit Scores?
By 401(K) 2012 under CC BY-SA 2.0
You might as well expect to boost your credit scores by paying up the high interest cash advance loans on time. However, creditors may mark you as per their wish. Similarly your scores might as well dip with the inability to repay. The chances of default remain high and plummeting credit scores would mean that you won’t be able to qualify for mortgage loans or for that matter any kind of traditional loan in future.
Future
In future there are chances that short term financing mentioned in your credit file will make lenders mark you a bit negatively. Therefore, it is only advisable that you find out about relevant details before applying for mortgage loans online. Make sure you ask your lender whether you would be able to qualify for a mortgage in case you have poor credit scores from your payday loans.
Solutions
Failure to repay your short term loans and resorting to rollover would mean that you are evidently moving towards a viscous debt trap, whereby your credit scores decline with each default. Therefore adopt these measures mentioned below in a bid to make sure that you are successfully avoiding this needling problem:
a) Make sure that you are weighing your need properly before securing short-term financing. There is no need to rush through the process. Consider closely whether your need can be met after your next pay day or not. If yes, then there is no need to opt for it.
b) Read the documents and clarify your doubts in a bid to make sure that there is no hidden fee or charge involved, that you aren’t aware of.
c) Make sure you are considering additional sources of earning till the time your debt is repaid. You can opt for freelance jobs or for that matter overtime.
d) If needed, you can resort to abstinence as well, saving up substantially for repaying the payday loan. Therefore, you are set for a worthy deal ahead.
The post Short Term Financing: How Does It Affect Your Chances of Securing a Mortgage Loan? appeared first on Expert Money.
