How Much Loan Can I Afford? A UK Guide

How much loan can I afford? The short answer

Start with what you can comfortably repay each month after essentials and existing debts, then work backwards to a loan size and term. A widely used planning guide is to keep total non-mortgage debt repayments under about 35% of your gross monthly income — some lenders stretch closer to 40%.

Affordability is not one number. A longer term lowers the monthly payment but raises the total interest you pay. Always check both before you commit.

What is the debt-to-income rule for personal loans?

Debt-to-income (DTI) compares your monthly debt repayments with your gross (pre-tax) income. For personal loans and similar credit, many advisers and lender models treat 35% as a sensible ceiling and 40% as a stretch.

Mortgage lenders use different affordability tests (often income multiples plus stress tests). For a personal loan, car finance or similar, focus on the payment you can sustain every month without relying on overtime or a hoped-for pay rise.

How do you work out a realistic loan amount?

Use three steps. First, list every existing monthly debt repayment — personal loans, credit cards (at least the amount you actually pay), store cards, car finance and overdraft fees you regularly incur. Second, take 35% of your gross monthly pay and subtract those existing repayments. Third, treat what is left as the maximum new loan payment you should consider — then run that payment through a loan calculator to see the borrowing amount at different terms and APRs.

Also sense-check against take-home pay. If the new payment would leave you with no buffer for food, travel or an emergency, it is not affordable — even if a lender might approve it.

• Step 1 — Add up existing monthly debt repayments.
• Step 2 — Work out 35% of gross monthly income.
• Step 3 — Subtract existing debts from that ceiling.
• Step 4 — Convert the leftover payment into a loan size using term and APR.

Worked example: £35,000 salary

Someone earning £35,000 has roughly £2,917 gross a month. At a 35% ceiling, total non-mortgage debt repayments should stay near £1,021. If they already pay £200 on a credit card and £50 on a small loan, that leaves about £771 a month for a new personal loan.

At around 7% APR over five years, a payment near £200 a month supports roughly £10,000 of borrowing. Stretching to seven years raises the loan size for the same payment but costs more interest overall. Use our Loan Repayment Calculator to plug in exact APR and term figures from real offers.

What else do UK lenders check?

Income and outgoings are only part of the picture. Lenders also review your credit file, recent applications, employment stability, bank statements and whether you have missed payments. Self-employed applicants may need longer income history.

A soft-search eligibility check (common on comparison sites) estimates your chances without a hard footprint on your credit file. A full application usually leaves a hard search, which can briefly dip your score — so avoid spraying applications across many lenders in one week.

Monthly payment vs total cost: which matters more?

The monthly figure decides whether the loan fits your budget today. The total amount repayable shows what the loan really costs. A lower monthly payment from a longer term can look affordable while costing hundreds or thousands more in interest.

Compare like-for-like offers using representative APR, arrangement fees (if any), early repayment charges and the total repayable. Our guide on how credit card interest works is useful if you are choosing between a loan and clearing card debt.

When you should borrow less than the maximum

Lenders quote the most they might lend you, not the amount you should take. Borrow less if your job is insecure, you have no emergency savings, rates might rise on linked products, or the purchase can wait until you have saved a larger deposit.

If you are already stretched, free advice from StepChange, National Debtline or Citizens Advice is a better first step than a new loan. Consolidation loans only help if the new rate and term genuinely cut cost — and you stop adding to the old cards.

Check your numbers before you apply

Use our Loan Affordability Calculator to see whether a proposed monthly payment fits your income and existing commitments. Then use the Loan Repayment Calculator to translate that payment into a loan amount, term and total interest.

Estimates only — lenders make the final decision. Check MoneyHelper and GOV.UK for impartial borrowing guidance, and always read the pre-contract credit information before you sign.