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Irresponsible lending and affordability checks

Giving a loan to someone who cannot pay it back is called "irresponsible lending". You can make a complaint against lenders for doing it. This is why they run affordability checks before lending to you.

What is irresponsible lending?

It is not responsible to lend to someone without checking what they can afford.

Irresponsible lending is when loans or credit are given without these checks.

The loan might be:


  • Bigger than needed
  • Too big to pay back

It can cause them to:


  • Cut back on essential living costs
  • Fall behind on payments
  • This can lead to the account defaulting

Responsible lenders are confident you can repay the debt:


  • In full and on time
  • Without having to borrow more money
  • Without falling behind on bills
  • Without causing you financial hardship

You can complain to the creditor if:


  • They lent you money irresponsibly
  • You are now struggling financially

Some payday loan companies have had to refund or write off debts because of this.

What is an affordability check?

An affordability check lets lenders know you can afford to pay them back.

How does it work?

They usually start with your household budget.

They look at:


  • Your income
  • You regular bills
  • Your spending needs

They also check your credit file for details of your debts.

They work out how much you can afford by:


  • Looking at your income and spending
  • Seeing what you have left over
  • Making sure you can afford this amount regularly

They should take these same steps when:


  • They extend a credit agreement or
  • Refinance an agreement

Lenders must check affordability for both people in a guarantor loan.

That means the:


  • Main (principal borrower), and
  • The guarantor

This applies to all lenders regulated by the Consumer Credit Act.

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Refused a loan after an affordability check?

It can be frustrating when an affordability check stops you getting credit.

It may be worth asking yourself a few things:


  • Do you really need to borrow more?
  • Could you manage without?
  • Are you struggling with any other debts?

It could be a sign that you need a href="/how-we-help.aspx">help with money.

What happens if I give wrong information to a lender?

Try not to forget anything during an affordability check.

Things can quickly spiral if you borrow more than you can afford.

Giving false information can:


  • Lead to your affordability complaint being refused
  • The people you owe might say you gave them bad information
  • You could argue they should have asked for more detail
  • Like bank statements or wage slips
  • Cause problems the next time you apply for credit
  • Some lenders use a fraud prevention service called National Hunter
  • It flags up differences on previous application forms

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