Affordability and Short Term Loans

One of the most important considerations for short term loans lenders is that of affordability. This means they must be confident that the loan being requested is truly affordable and therefore suitable for the individual needs of the applicant in question. In order to reach this decision short term loans lenders will perform a number of checks throughout the application process. These checks will actually start right at the beginning of the purpose; via the application form. Not only will this form gather the basic personal information you would expect but in addition it will also then provide the information they require to complete affordability checking. These checks will be done through assessment of the customers’ existing expenditure, thanks to the access granted to credit reference file information and also the details of the customers’ existing budget; supplied at the application stage. In order to understand exactly how this particular assessment effects the overall decision made by a short term loans lender, today we will review this in greater detail.

Affordability and Short Term Loans

In order to understand whether an applicant can afford a loan they have requested a lender of short term loans will conduct a series of different checks specific to verifying this. The exact manner in which this is completed will of course vary from lender to lender and the also the order of completion too, so what you read here is an example of the kind of checks which will be completed in some manner. As mentioned above one of the key providers of affordability based information is that of the applicants credit reference file and this is because of two factors made clear to the lender. The first of which is with regards to the applicants previous performance in terms of credit commitments. A history of successfully repaid credit agreements will begin to build the picture that the customer understands and is able to maintain and repay credit. Where there are entries suggesting poor credit performance, the lender will then need to consider if this newly requested loan would be suitable. The second factor is that of active credit agreements. The lender will want to make sure the applicant is not over committing themselves financially and therefore will assess and make decisions based on any and all active credit agreements shown.

The second major factor mentioned earlier was that of the customers budget. In order to understand this a short term loans lender will ask that applicants supply there current budget as part of applying. So this means detailing all current incomings and out-goings. Like the review of the applicants credit reference file, a review of the contents of the applicants budget will also give a very clear indication as to their ability to afford and repay the loan instalments due under the proposed agreement. By combining this information with that which has been gathered from the credit reference file, a short term loans lender will be one step closer to making an informed and sensible decision concerning an applicant’s request for a short term loan.