Loan/Salary Ratio

Sanjjj1189

Hi guys, so I've been reading up on loans, and see many people saying you can only get one upto 30% of your salary..

I was earning £21,600 last year and got a £14,950 loan from Nationwide, so clearly this 30% figure is wrong or was I lucky?

I have had a promotion and earn £40,000 now, lets say for example I get a £25,000 loan over 5 years, I would earn £125,000 in that amount of time so why am I being declined?

[Deleted User]

There's anecotal evidence that 50% is a more realistic figure, but there's no hard and fast rule across lenders. It also varies with income levels.

nearlyrich

Sanjjj1189 wrote: »

I was earning £21,600 last year and got a £14,950 loan from Nationwide, so clearly this 30% figure is wrong or was I lucky?

I wouldn't say you were lucky to be in debt to that level is the £21600 gross ? What other outgoings did you have at the time?

somethingcorporate

Lucky? personally not having such a massive debt mountain I would count as lucky, not loading up as much as you can.

Thrugelmir

Sanjjj1189 wrote: »

I have had a promotion and earn £40,000 now, lets say for example I get a £25,000 loan over 5 years, I would earn £125,000 in that amount of time so why am I being declined?

Um. You still owe money from the previous loan.

jonesMUFCforever

Affordability is the key IMO.
You could earn £25k and get a £20k loan if you have low outgoings but someone else with higher outgoings may be declined.

Sanjjj1189

zx81 - thanks for your response.

nearlyrich- that's £21K BEFORE tax! sorry I never made that clear, and I had no other outgoings

somethingcororate- I made £10,000 on it from shares of a company called Quindell, that's the only reason I got the loan and I told my bank it was for a car

Thrugelmir - I made enough off the stock market to pay the loan back by last month

jonesMUFCforever- Thanks that does make sense I was just perplexed by this stupid 30% rule people talk about

Pixie5740

Your gross salary is your salary before tax.

30% is a rule of thumb rather than a hard and fast rule as it's unusual for adults to have little or no outgoings.

I'm confused, did you borrow £14950 to invest and only got £10k back or did you make £10k over and above the initial loan and interest you paid?

andyfromotley

i understand from posts that 25k loans are pretty hard to come by.

R_P_W

Borrowing money to gamble on shares short term........what could possibly go wrong?!

CalumHeath

Your loan eligibility is not solely based on your salary.

Any combination of the following factors might be taken into consideration:

- amount of existing debt
- amount of existing available to credit
- history of settled accounts
- history of incurring defaults
- number of recent applications for credit
- age
- whether single, married, widowed, separated or divorced
- whether home-owner, tenant or living with parents
- whether you're on the electoral register
- salary

This is by no means an exhaustive list and how each credit-provider assesses you is different; some companies may not consider many of these factors, some may consider even more. Certain factors may not carry any weight and some might dictate the decision-making process completely - you'll never know.

There is no one rule and the only way you'll know is if you apply and are accepted; ultimately, it's up to each company whether they want to give you a loan or not and on what terms.