How do lenders check I can afford the repayments?

2 min read

Debt-service coverageThe core test

Accounts + bank dataThe evidence

Existing commitmentsCounted against you

Headroom mattersNot just breaking even

The central measure: coverage

The heart of an affordability check is debt-service coverage — how comfortably your operating cash flow covers your debt payments. A lender wants to see that the new payment, added to what you already owe, leaves genuine headroom, not a knife-edge. Breaking even is not enough; they are looking for a cushion that survives a weaker month.

The evidence they use

To assess coverage, lenders read your filed accounts, recent management accounts, and — increasingly — live bank transaction data via open banking. Bank data shows real inflows and outflows, not just a year-end snapshot, so it reveals whether income is steady or lumpy and whether the account regularly runs tight. See the underwriting guide for the full picture.

Existing commitments count

Affordability is assessed on top of what you already owe. Existing loans, finance agreements, tax liabilities and regular commitments all reduce the headroom available for a new payment. This is why clearing or consolidating small debts before applying can help, and why an honest declaration of commitments matters — a lender that finds undisclosed debt will trust the rest of the application less. See checking affordability yourself.

Test your own coverage on the affordability calculator before applying, then apply with confidence.

Frequently asked questions

What debt-service coverage ratio do lenders want?

Most lenders look for coverage comfortably above break-even — enough that operating cash flow exceeds debt payments with a clear margin, so a weak month does not cause a miss. The exact threshold varies by lender and sector. Rather than target a number, aim to show that the new payment leaves obvious headroom on top of everything you already pay.

Will the lender see debts I don't declare?

Very likely. Open-banking data, credit searches and filed accounts reveal most commitments, so undisclosed debt tends to surface — and when it does, it undermines trust in the whole application. Declaring everything upfront is both the honest and the tactically wiser choice; a clean, complete picture is assessed far more favourably than one with gaps.