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Affordability and what it means for you

What is affordability and how does it affect my loan application?

Secured Loans > Our Loans > Secured Loans > What is affordability and how does it affect my loan application?

Affordability. It’s a word you might hear a lot when you apply for a secured loan, but what does it actually mean?

When it comes to applying for a secured loan, there are many factors that can affect your eligibility. Your affordability is a key part of your loan application, so it’s important to understand how it works. 

In our guide, we examine what affordability means for you.

What is affordability?

Lenders look at your affordability closely when you apply for a loan. Simply speaking, your affordability determines whether you can cover the loan repayments with your current finances.

Your affordability is important because it tells lenders how likely you are to meet the repayments on time. If you’ll struggle to meet the monthly payments, the loan may not be suitable for you and your circumstances.

How is affordability calculated?

Your affordability is based on how much available money you’ll have to cover the loan costs. Lenders will assess your affordability by looking at the money coming in and out of your account over the last few months. 

That includes:

  • Your regular income
  • Any contractual payments, like loans, your mortgage, or bills
  • Regular spending on things like transport, travel, and entertainment

Once all your regular outgoings have left your account, you’re left with a sum of available money each month. Is it more than enough to comfortably cover the loan repayments? And if you’re hit with any unexpected costs, are you still likely to have enough to repay the loan?

If the answer is yes, you should be able to comfortably manage the loan repayments.

How can I prove I can afford a secured loan?

In order to assess your affordability, lenders will need to review your finances to make sure the loan is right for you. To do this, they’ll ask to check certain documents. First things first, they’ll review your credit file to see how much you’re currently borrowing and paying off each month. 

You may be asked to share paperwork, such as recent payslips and bank statements. If you’re self-employed, you may need to provide certified / stamped accounts from your accountant or a SA302 form to help prove you can afford the loan. 

How can I improve my affordability?

Improving your affordability is all about reducing your spending and maximising your income. However, increasing your income is easier said than done. It’s easier to focus on what you can control: reducing your outgoings and financial commitments.

There are a few ways you can do this. To improve your affordability and limit your outgoings, you could:

Reduce your credit card balance

Having a big credit balance can put pressure on your finances. Lenders looking at your credit report can see if you’re carrying a high balance and it may affect their decision.

Reducing your credit spending as much as possible helps prove that you can live within your means without relying on credit to get by. If you’ve nearly reached your credit limit, lenders could worry that you might struggle to afford another loan. 

Pay off a loan

Lenders prefer it if you aren’t handling large amounts of debt. The more you have to repay, the harder it could be to manage your repayments to them. 

If you have a loan you can pay off and settle in full, it could free up your finances and improve your affordability for when you apply. Bear in mind though, you might have to pay an early repayment charge.

Review your utility bills

Could you be spending too much on everyday bills? Whether you’re paying over the odds for your broadband or energy bills, it’s always worth looking to see where you can save.

Try speaking to your provider and asking for a better deal or using a comparison site to see if there’s cheaper rates elsewhere. 

Cut back your spending

The more you spend on a regular basis, the lower your affordability. See if there’s a way you can reduce your typical spending. For example, are you currently paying for services that you are not using?

From a gym membership to streaming platforms, cancelling any recurring regular payments could free up your finances and help your affordability for a secured loan.

How can I work out my affordability before I apply?

Before you apply for a secured loan, it’s important to understand what your affordability looks like from a lender’s perspective. This means taking a look at your outgoings each month and seeing if you have enough left to repay the loan. 

It’s important to know what your monthly repayments could look like before you apply. Knowing this will help you understand if you can afford the loan repayments. 

To help you get a better picture of your finances, our affordability form can help you break down your expenses and show you where you could save.

What else do lenders look out for?

Affordability isn’t the only thing lenders are interested in. If you’re looking for a secured loan, there are other factors which can determine whether you’re approved.

The equity in your home, your credit history and any financial connections you have, could also impact your eligibility. A good track record of making payments on time will go a long way to getting approved for a secured loan.  

At Evolution Money we’ll work with you to understand your individual circumstances and affordability to find a loan that’s suitable for you. 

What’s more, you’ll receive a no-obligation quote without affecting your credit score.

Warning: Late payment can cause you serious money problems. For help, go to moneyadviceservice.org.uk

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Evolution Money Limited is a licensed credit broker and service provider to Evolution Lending Limited. If your application doesn’t meet the underwriting requirements of Evolution Lending Limited we may pass your information to other lenders and brokers. Evolution Money Limited is a company registered in England & Wales, registration number 06987852 and registered at 9 Portland Street, Manchester, M1 3BE. Authorised and regulated by the Financial Conduct Authority, firm reference number 708324.


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