What affordability checks should a UK car loan lender undertake?
UK car loan lenders generally follow certain affordability checks to determine whether a borrower is capable of repaying the loan. These checks may include:
Income verification: The lender will verify the borrower's income to ensure that they have a stable source of income to make the loan payments. This may involve reviewing pay stubs, tax returns, or other documentation.
Credit history: The lender will review the borrower's credit history to determine their creditworthiness and risk level. A borrower with a good credit score and a history of making on-time payments is more likely to be approved for a car loan.
Debt-to-income ratio: The lender will calculate the borrower's debt-to-income ratio to determine their ability to take on additional debt. This ratio compares the borrower's monthly debt payments to their monthly income.
Employment status: The lender will consider the borrower's employment status, including the stability of their job and the length of time they have been employed.
Asset and collateral: The lender may also consider the borrower's assets, such as savings or other property, as collateral for the loan.
Overall, the lender will consider these and other factors when evaluating a borrower's ability to afford a car loan.