In the last few years, payday loans have taken root in the UK - moving from being a fringe consideration for the rare few to becoming a mainstream financial product.
With sky-high interest rates, there are very real risks involved taking one out. But will it harm your chances of getting a mortgage in future too?
ConcernThere are growing whispers of concern. At the end of last year a BBC Newsnight report claimed that two thirds of mortgage brokers say they have had a client turned down for a mortgage because of a payday loan in their past.
If you still have a loan outstanding it will be taken into consideration on affordability grounds - so if you owe a large sum of money you could be turned down on these grounds.
Even if you have paid off any payday loans you could have a problem. A report from the IPPR has revealed that the most common use of payday loans is to pay for everyday expenses, such as groceries, gas, electric and water bills. So it's not surprising that for some lenders, they are a sign that people are living beyond their means.
Experian warns that some lenders will see the fact that you have taken out a payday loan as a sign that your finances are under a pressure. And some brokers report that those who have taken out payday loans have faced problems with some lenders.
Good newsHowever, having a payday loan on your record is not an automatic disqualification for getting a mortgage. All lenders use the same data from your credit report when they are weighing you up for a mortgage. But they will also employ their own priorities, and their own data when they use your report to produce a credit score.
Experts at Experian say that if you take out the loan and pay it in full and on time it could actually count in your favour with some lenders, because you are demonstrating that when you borrow, you repay the money responsibly. Some lenders don't discriminate between these loans and any other kind of borrowing, so having a loan and paying it off could help your application.
What can you do?If you have taken out a payday loan, the advice is not to panic. Concentrate on paying it off on time and in full and then managing your budget so that this isn't a regular requirement.
If you want to get a mortgage, you should still be able to find lenders who do not discriminate between payday loans and any other form of short-term loans, so they will not discount you for having one on your file.