Calculating loan affordability – what lenders think about?
When considering loan affordability, it’s important for borrowers to establish how much of the loan they can afford.
Most will do this with the help of a loan calculator. Such a tool is readily available online and is extremely easy to use. When you apply for a loan, the lender has the final say when it comes to actually paying out. Most will use different factors when it comes to helping them decide whether you pose as a risk, read on to discover what these are:
How much can you afford to borrow?
An online loan calculator is a great asset to those wishing to answer the question ‘how much can I afford to borrow?’ Such a tool will reveal the payment amount, the number of payments over a certain period of time and the interest rate. Many forget about the latter, which can cause huge problems in the future.
Will a calculator tell me if I qualify for a loan?
A calculator, although an extremely handy tool, won’t tell you whether or not you qualify for a loan. This generally depends on your credit rating and how much you intend to borrow.
Credit score
All lenders will consider your credit score. If this is poor, you’ll appear unreliable. There are a number of ways to build your score prior to applying for a loan, one of which includes combining any existing debts. Lenders have their own preferred ways of checking a credit score – just because you’re disapproved by one, this doesn’t necessarily mean you’ll be refused by others too, you may even find a company specialising as a bad credit lender.
Credit reference agencies
Credit reference agencies come in the shape of companies that are allowed to retain information about various consumers’ borrowing habits. On applying for a loan or credit card, the individual wishing to borrow will be asked to fill out an application form. Such a form will give the lender permission to look over your credit reference file. If a lender refuses you due to what they see on your file, they are obliged to tell you why. Once you know the reasons you have been refused in the past, you may be able to address some of these issues to improve your chances for future applications.
