What UK Lenders Really Check Before Giving You a Loan

If you’re thinking about taking out a payday loan or any kind of credit, you might feel anxious about all the questions and paperwork. You may worry that lenders will judge your choices or turn you away. Let’s clear up the mystery. If you’re applying for credit, you deserve to understand what lenders are looking for and why.

You are not alone if you feel stressed about affordability checks. Many people feel the same way. The good news? These checks are there to help you, not just the lender. And you have the power to prepare.

Why Lenders Check Affordability and What That Really Means

An affordability check is a review of your money situation. Every UK lender, whether it’s for a payday loan, credit card, or mortgage, is required by law to make sure you can repay without getting into financial trouble.

This rule is there for your protection as well as for the lender. The Financial Conduct Authority (FCA), the official body making the rules, wants to stop people from ending up with debts they can’t handle.

Here’s what this means for you: Before any lender gives you money, they must check your finances. They’ll want to see if you can afford the repayments on top of your current spending.

What Does an Affordability Check Involve?

Let’s break down exactly what lenders look at when you apply for a loan or credit.

Your Income: How Much Money Is Coming In

Lenders need proof of what you earn. They’re not just being nosy. They want to see you’ll have enough money to make your repayments each month, after paying for your everyday essentials.

What counts as income?

• Your wages or salary (including overtime and bonuses)
• Benefits or Universal Credit
• Pension payments, if you’re retired
• Maintenance or child support payments
• For self-employed: your business income

How do you prove your income?

• Payslips (usually the last 3 months)
• Bank statements
• Benefit letters
• Self-employed? You’ll need up-to-date accounts or tax return summaries (called SA302s from HMRC)

TIP: If you get paid in cash or have irregular earnings, keep good records. Lenders need to see a clear, regular pattern.

Your Outgoings: What You Spend Each Month

Lenders will ask about all your regular expenses. This isn’t about catching you out. It’s about making sure you won’t be stretched too thin.

What expenses do lenders look at?

• Rent or mortgage payments
• Council tax
• Utility bills (electric, gas, water)
• Loan or credit card payments
• Childcare and school fees
• Travel costs (bus, train, car expenses)
• Food and household essentials
• Insurance policies
• Any other regular commitments

You’ll need to be honest. Don’t leave out childcare, school costs, or even subscriptions. Lenders check your bank statements, so they’ll spot regular payments.

TIP: I always recommend you make a full list of your expenses before you apply. This will help you spot areas where you might be able to cut back, and it means there will be no surprises when the lender reviews your application.

Debt-to-Income Ratio (DTI): How Much of Your Money Goes to Debt

This is a simple calculation lenders use:

1. They add up all your monthly debt repayments.
2. Then, they divide that total by your monthly income.

Example:
If you earn £2,000 each month and spend £800 on debt repayments, your DTI is 40%.
Most lenders don’t want your DTI to go above 43-45%.

If your DTI is high, you might be declined, even if you always pay on time.

Loan-to-Income Ratio (LTI): How Big Is the Loan Compared to Your Income

This is mainly for mortgages, but some payday lenders check it too.

They compare the size of the loan to your annual income. If you’re asking for more than a typical lender’s limit (often four to five times your income for mortgages), they might say no.

Your Credit History: Your Track Record With Borrowing

Lenders will check your credit file. This shows how you’ve managed money in the past.

They look for:

• Your credit score (a number rating how reliable you are with credit)
• Missed payments, defaults, or County Court Judgements (CCJs)
• Other debts you already have (credit cards, loans, overdrafts)

Good to know:
You don’t need a perfect score, but lots of missed payments can hurt your application.

Stress Testing: Can You Still Pay if Things Get Tough?

Lenders sometimes check if you could still afford repayments if interest rates went up. This is called “stress testing.”
For mortgages, they might add 3% to the interest rate to see if you could still pay.

Other Things Lenders Look At

• Deposit Size: For mortgages, you’ll need at least 5% of the property price.
• Employment Status: Most want to see you’ve been working or self-employed for at least 3 months.
• Loan Length: Mortgages can last up to 40 years, payday loans are short-term.
• Age: You’ll usually need to be at least 18, and most lenders won’t lend if repayments would run past your 75th birthday.
• UK Bank Account: You need this to receive the money.

What Happens During the Affordability Check?

Let’s walk through what you can expect:

1. You fill out the application:
   You’ll need to list your income, job details, expenses, and debts.
2. You upload documents:
   Payslips, bank statements, and anything that shows your income and regular bills.
3. Lender reviews your details:
   Some checks are done by computer, some by a real person.
4. Credit check:
   They’ll look at your credit file.
5. Decision:
   The lender will say yes, ask for more information, or say no.

You’ll usually hear back within a few days. Some payday lenders give a decision in minutes. But don’t rush. Make sure you understand the offer first.

TIP: I have seen many borrowers sign agreements without reading the details. Always read the loan terms carefully and make sure you know the interest rate, fees, and repayment dates before you accept any offer.

What If You Don’t Pass the Affordability Check?

It can feel discouraging if your application is declined. Remember, this is not a judgment on you as a person. It just means the lender thinks the repayments would be too much for your current situation.

What can you do next?

• You can appeal:
  If you think there’s been a mistake or you can provide better evidence, ask the lender to review their decision.
• You can reapply later:
  If you improve your finances by paying off debts or increasing your income, you might have a better chance.
• Seek help:
  Free advice is available from organisations like National Debtline, StepChange, or Citizens Advice. They’ll help you make a plan and talk to lenders.

Common Reasons Lenders Say No

• Your debt repayments are too high compared to your income.
• You don’t earn enough to cover all your outgoings and the new loan.
• You have unstable income or have recently changed jobs.
• You missed payments on other loans or credit cards.
• You didn’t declare all your expenses, and the lender found them anyway.

If you’re turned down, don’t take it personally. Use it as a signpost. It’s time to make some changes that put you in a better position next time.

How To Boost Your Chances and Protect Yourself

If you want to improve your chances of passing an affordability check, here’s what you can do:

Review Your Finances

• Write down all your income and spending.
• Add up your debts and regular bills.

Clear Some Debt

• If you can, pay off or reduce credit cards or loans.
• Even a small reduction in debt can improve your DTI ratio.

Check Your Credit Report

• Get a free copy from Experian, Equifax, or TransUnion.
• Fix any mistakes. Make sure your address and debts are correct.

Collect Your Documents

• Have recent payslips and bank statements ready.
• For benefits, keep your latest letters.
• If you’re self-employed, keep up-to-date tax summaries.

Be Upfront and Honest

• List every source of income.
• Don’t leave out regular spending. Lenders will see it.

Avoid Taking on New Debt

• Don’t apply for new credit cards or loans just before your application.

TIP: I always tell people to pause before applying for any new credit while waiting for a lender’s decision. Each application can leave a mark on your credit file and too many can lower your score.

How Lender Rules Can Differ

Not all lenders are the same. Here’s what can change:

• High-street banks (like Lloyds or Halifax) may have stricter rules.
• Specialist lenders might be more flexible if you’re self-employed or have an unusual situation.
• Online affordability calculators are useful, but they’re just an estimate—only the full application will give you a real answer.

TIP: If you’re not sure you’ll qualify, call the lender and ask about their criteria before you apply.

Where This Leaves You and Your Loan Application

Getting a payday loan or any kind of credit is a big step. The affordability check isn’t there to trip you up. It’s a tool to help you avoid taking on a debt that could hurt you later.

You now know:

• What documents you need
• What lenders are really looking for
• How to improve your chances if you’re struggling

Your next steps:

• Review your budget
  See where your money goes each month.
• Collect your paperwork
  Get your payslips, bank statements, and benefit letters ready.
• Check your credit file
  Fix any errors right away.
• Ask for help if you’re worried
  National Debtline, StepChange, or Citizens Advice are all there for you.

Remember, you are not alone. Needing support is never a failure. It’s a sign of strength. Each step you take puts you in more control of your money and your future.

Ready to apply, or want to learn more about payday loans?
Check your chosen lender’s website, try their affordability calculator, or talk to a free adviser if you’re unsure.

You deserve a loan that fits your life, not one that makes things harder. Take it one step at a time. You can do this.

Further support and advice:

• National Debtline
• FCA Loan and Mortgage Guide
• Affordability tools from major UK banks