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i The advice on this page applies to anyone with personal debts taken out in the UK.

Irresponsible lending and affordability checks

Before a creditor can lend you money they must take steps to ensure you can afford to pay it back.

If you take out a loan or other credit agreement you’ll usually be asked some questions about your income and your regular household expenses. Responsible lenders can use this information, plus details about your other debts from your credit file, to assess whether the agreement is manageable.

Creditors should also take steps to check affordability if they’re extending or refinancing a credit agreement.

Refused a loan after an affordability check?

If you’ve tried to take out a loan or refinance existing debts but your lender has refused after doing an affordability check, you first need to decide whether you really need to borrow more. Could you manage without further borrowing?

Being refused credit can often be a sign that you need to get debt advice, especially if you have other debts that you’re struggling to manage.

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What is irresponsible lending?

If a creditor hasn’t done proper affordability checks, they may give you a loan that’s larger than you need, or that you can’t afford to pay back. This could leave you with a choice of cutting back on your essential living costs to keep up with the payments, or missing payments to the debt which could lead to your account defaulting.

Lending money without checking affordability is known as irresponsible lending.

If this has happened to you and as a result you’ve struggled to repay a debt you could make a complaint to the creditor.

Some payday loan companies have been made to refund interest or write off debts which were lent irresponsibly without affordability checks.

If you make a complaint, there’s no guarantee that your creditor will agree to this, but you may be able to agree to other concessions, for example allowing you to pay the debt back at a reduced amount. 

What happens if I give wrong information to a lender?

It’s important to give accurate information to your creditor if they’re checking affordability.

It might seem tempting to miss out expenses or exaggerate your income to get accepted for a loan or to increase the amount you can borrow, but this could make your situation a lot worse if you borrow more than you can realistically afford.

In addition, giving false information on application can cause problems with future credit applications. Some lenders use a fraud prevention service called National Hunter which can flag up discrepancies on previous application forms.