Responsible lending means ensuring that the borrower is able to repay any loan that is made to them without undue hardship.
If you already have a loan and are having difficulty then you might find the following information useful:Responsible Lending Worksheet
A recent FSA survey has suggested that mortgages should not be more than 35% of your post tax earnings.
The figures in this worksheet are suggested figures.
It is important that you do not accept a loan repayment that is higher than 50% of your disposable income.
Firstly you need to calculate your disposable income.
What is your average monthly household income?
This is the earnings or benefits that you and your partner has coming in each month.
You cannot include lodger’s income but you can include any money that they pay you.
What are your monthly expenses?
Monthly expenses are THE TOTAL OF 1 TO 7 BELOW:
• Rent/mortgage, electricity and heating £
• Groceries £
• Internet, telephones and cable £
• Gas, car payments and Insurance £
• Loans and credit card payments £
• Child or elder care £
• Everything else £
MONTHLY DISPOSABLE INCOME
NOW DEDUCT FIGURE B FROM FIGURE A AND WRITE RESULT BELOW
NOW FIND OUT WHAT YOUR PROJECTED MONTHLY LOAN REPAYMENTS ARE.
YOUR MONTHLY LOAN REPAYMENTS SHOULD BE LESS THAN HALF OF FIGURE C.
IF THE LOAN REPAYMENT IS MORE THAN HALF THEN YOU MAY HAVE DIFFICULTY REPAYING THE LOAN.
IF THE LOAN REPAYMENTS ARE MORE THAN HALF THEN YOU SHOULD EITHER
REMEMBER! THE LENDER HAS NO WAY OF CHECKING THESE FIGURES AND IT IS UP TO YOU TO BE HONEST WITH YOURSELF.
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