Payday loans, a form of high-cost short-term credit, can sometimes be consolidated through a remortgage in the same way as cards or personal loans, but many lenders view them differently. Recent or repeated use of payday loans is often taken as a sign of short-term financial pressure, which can narrow the options more than a similar amount of other unsecured debt.
This page looks at payday loans specifically as a debt to consolidate. For the wider mechanics and risks of debt consolidation, see our debt consolidation remortgage page, and for a general low credit score, see remortgaging with a low credit score.
On this page
This page covers
- Reason for remortgaging
- Consolidating debtsSecuring debts on your home carries extra risk and needs careful thought.
In short
- Payday loans are usually viewed more cautiously than other unsecured debt of a similar amount.
- How recent and how frequent the payday borrowing was tends to matter more than the total owed.
- Consolidating payday loans secures short-term, previously unsecured debt against your home instead.
- Free debt advice can help if payday borrowing has become a repeated pattern rather than a one-off.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
Why do lenders view payday loans differently?
A payday loan is a short-term, high-cost form of credit, usually taken out to cover a shortfall until the next payday. Because it is often used when other credit is not available, or as a last resort, some lenders treat it as a stronger signal of financial pressure than a credit card or personal loan of a similar amount, even if it has been repaid on time.
One payday loan taken out some time ago and repaid without issue is generally viewed differently from several used close together, or repeated payday borrowing over a longer period. Our guide on what is adverse credit? explains broadly how lenders weigh different types of credit history.
How recent and how frequent use tends to matter most
| Pattern | How it tends to be viewed |
|---|---|
| A single payday loan, over a year ago, repaid on time | Often the least restrictive of these examples |
| One or two payday loans in the last 12 months | Generally viewed more cautiously by many lenders |
| Frequent or repeated payday loans | Often taken as a sign of ongoing financial strain |
| Missed payments on a payday loan | Usually weighed alongside any other missed payments or defaults |
A general pattern, not the criteria of any particular lender.
Because the timing matters so much, waiting until payday borrowing is further in the past, where that is realistic, can widen the number of lenders who may consider an application.
Consolidating payday loans through a remortgage
Where a payday loan is settled or repaid, clearing it through a remortgage works in a similar way to consolidating any other unsecured debt: the balance is added to the amount you borrow, secured against your home instead of standing alone as short-term credit. Some lenders may want to understand why the payday loan was needed in the first place, not just that it has been repaid.
A payday loan is usually repaid within weeks or months. Consolidating it into a mortgage can spread the same amount over many years, and if you cannot keep up the new mortgage payments, your home could ultimately be at risk.
If payday borrowing was a one-off response to a specific event, being able to explain this clearly, alongside evidence your finances have since stabilised, generally helps an adviser identify which lenders may still consider the application.
What are the alternatives?
- Waiting where possible, since payday loan use further in the past is generally viewed less cautiously.
- Free debt advice, particularly if payday loans have become a repeated way of managing money, rather than a one-off.
- A debt management plan, which keeps the debt unsecured while you repay it at an affordable rate.
- A second charge mortgage, which leaves your existing mortgage deal untouched but still secures the debt on your home.
Free, impartial advice is available from MoneyHelper, StepChange and National Debtline, and can help if payday borrowing is a sign of a wider gap between income and outgoings that consolidating alone will not fix.
What may shape consolidating payday loans through a remortgage
| Factor | Why it matters |
|---|---|
| How recent the payday borrowing was | Use in the last 12 months tends to be viewed more cautiously than older borrowing. |
| How frequent the payday borrowing was | Repeated use is often viewed as a stronger sign of financial pressure than a single loan. |
| Whether payments were kept up | Missed payments on a payday loan are weighed alongside any other missed payments or defaults. |
| Total amount being consolidated | The combined balance, alongside any other debts, sets how much extra you need to borrow. |
| Other credit issues | Payday loan use alongside defaults or a CCJ is generally assessed together, not in isolation. |
| Loan to value | Consolidating debt raises your LTV, which can narrow your options with adverse credit. |
| Income and affordability | Lenders will want to see the underlying gap that led to payday borrowing has been addressed. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- Dates and amounts of any payday loans taken out
- Confirmation of whether they were repaid on time and in full
- Your credit reports from Experian, Equifax and TransUnion
- An explanation of what led to the payday borrowing and what has changed since
- Your mortgage balance, deal end date and any early repayment charges
- Proof of income and a realistic monthly budget
Frequently asked questions
Do payday loans always stop a remortgage?
No, but recent or frequent use is often viewed more cautiously than other unsecured debt. A single older payday loan, repaid on time, tends to matter less than repeated use in the last year or two.
How long does a payday loan stay on my credit file?
A payday loan is generally recorded like other short-term credit, and any missed payment marker stays for 6 years from when it was recorded. The application itself also leaves a hard search, visible to other lenders for a period.
Is it worth consolidating a single old payday loan?
If it is the only credit issue on your file and was repaid on time some time ago, it may have little effect either way. A specialist adviser can look at your full file to say whether consolidating it makes any practical difference.
What if I have used payday loans several times recently?
This is often viewed as a sign of ongoing financial pressure rather than a one-off, which can narrow your options more than the amount owed alone. Free debt advice can help you look at the underlying budget before deciding whether to consolidate.