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Affordability Checks – Your Questions Answered

Published: 15 Aug 2019

Whether you’ve completed one before or not, affordability checks can seem a bit daunting and invasive when you’re applying for a loan. Whilst it’s not in our nature to be so open about the money we earn and how much we spend on certain things, in this case it serves an important purpose; keeping your finances safe.

In this guide, we’ve answered all your most pressing questions about affordability checks and why you have to complete one as part of the loan application process. Read on to find out what they’re all about.

What is an affordability check?

An affordability check is exactly what it sounds like; it’s a check we perform on your finances to make sure that you can manage the credit you’ve applied for. In other words, we’re checking that you are able to make your payments without creating financial difficulties further down the line.

When you complete an affordability check with us, either online or in-store, you’ll need to give up-to-date information about your salary, which includes how much and how often you are paid. You’ll also need to provide information about your usual monthly expenditures, which includes whether you have children, whether you own a vehicle, your mortgage costs, utilities, credit payments, traveling and household expenses. You may need to provide supporting documentation for this, such as a recent payslip and bank statements.

All of this information helps us to see whether a loan from us would help or hinder you financially, and therefore plays a big part in whether you’ll be approved or not.

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Who must complete an affordability check?

Anyone who applies for a personal loan with us here at H&T is required to complete an affordability check. This is due to the type of loan being offered, which is known as an unsecured loan. Simply speaking, this means the loan is agreed based on the customer’s perceived ability to pay in full and on time, rather than based on an item or asset of value, which is the case with pawn loans.

Every single personal loan applicant must fill out an affordability check, whether they’re a first-time applicant or they’re applying for a top-up on an existing loan. Even if you have already filled one out with us before, you must complete a new one each time you apply - even if your circumstances have not changed.


Why are affordability checks necessary?

Affordability checks are extremely important for a number of reasons, with the most vital being the safety of all our customers. Affordability checks for this type of loan is required by law and enforced by the Financial Conduct Authority (or FCA for short). They’re an integral part of the FCA’s Treating Customers Fairly guidelines, which dictate what H&T, as a credit provider, can and cannot do.

These checks were brought in as a requirement after some unscrupulous lenders were approving loans to customers who could not afford to pay them back. Of course, this creates a terrible situation for both the customer and the lender. Unfortunately, problems like this can snowball and result in further financial problems for both parties; the customer is likely to have a lower credit rating and could end up in further debt, and the lender cannot make profit and may also be liable to fines from regulators.

What happens if I give wrong information?

The information you give as part of your affordability check must be as accurate as possible. While it may be tempting to tweak the figures in order to get approved or to get a larger loan, this is fraudulent and could cause serious issues in the future.

Not only would you be putting yourself at risk of getting into arrears on the loan and therefore damaging your credit rating and personal finances, it’s also likely that you’ll be flagged up by fraud prevention software. This can make it much harder for you to apply for credit in the future and could have a knock-on effect in many areas of your life. In short – it’s essential that you tell the truth to protect your financial integrity

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Is my information safe?

Your information held by H&T is safe thanks to our long experience and strict internal data protection policies. We adhere to all data protection laws as well as the guidelines set out by industry regulators. Of course, data protection is a very important consideration for any business and if we do not have the correct safeguards in place we are risking both H&T’s reputation and a potentially crippling fine. Protecting the data of our customers helps us to protect our business as a whole, helps to prevent fraud and most importantly of all; protects our customers. Without safe customers, we could never have a successful business.

We keep all information on file for 6 years and we may share it with certain other parties where we are required to do so; such as regulatory authorities, credit reference agencies and law enforcement agencies. Of course, you are also always welcome and within your rights to request copies of the information we hold on you, too. The information is kept digitally on secure servers within the UK  – where they are protected by specific laws and regulations - and will never be transferred outside of this jurisdiction.  If you have any questions about how we store and use your information, or if you’d like to exercise your rights as a customer, send an email to