How do loan companies work out the most you can borrow

mrmarsupial

Hello.

I want to take out a loan, my credit rating is currently excellent. I basically want the most they will give me and im sure they must have a formula for working out how much money to lend you unsecured, I dont know if it is a % of your annual salary or what.

Does anyone know how companies work out what the maximum they will lend? Does it differ with different companies? Once I got told by a barclays advisor about 2 years ago that if I applied for an amount above what the system would allow based on my details it would be an automatic decision of no regardless of how good my credit rating is. When I asked the question can you tell me how this threshold is worked out she acted like it was an official secret or something.

Can anyone help with this?

Thanks!

Gemmadm

Hi with black horse finance they take your incomings and outgoings and see whats leftover. They wouldn't give me one as they said my outgoings were exceeding my income by £400. They did put in the full mortgage amount (even though i pay half) and full bills, even petrol etc. With Citifinancial though - not sure how they worked it - they said i could get up to £10,000. All have their own criteria. Check out Martins best loans cos if your credit rating great and your income is steady, you should get a good rate.
I also bank with barclays and they have a pre approved offers section where i got mine and it shows how much they will let you borrow based on what you've told them about yourself and how you manage your account. Sorry i've gone on a bit.
Gemxx

Rafter

The maximum is based on a formula or scorecard which varies from bank to bank.

It is basically linked to affordability though, and how much you can afford to repay each month after your current debts, housing, bills, food and other costs.

This will then be moderated by how secure your job is, whether you manage your current finances and debts well and whether you have had debts in the past.

Over time you can build up about the same as your annual salary in unsecured debt if you are earning over about £25k. If you are new to debt then unlikely you will get that much.

So. If you have been in your job for a few years, have a clean credit record and are earning £30k+, you might get a loan for £15k if you have few debts and if you have existing debts of £15k you have been managing well, you might be able to get a further £15k although you may have to get it in one or two chunks.

Owning your own home is also a distinct advantage.

Good luck.

R.