How much can you borrow?

A lender will decide whether to give you a loan or credit based on a number of factors, including:

your income and security of your job
your credit history
whether you have outstanding loans
evidence of your savings
whether you are borrowing on your own or with someone else
whether anyone will act as guarantor for you, if you are unable to repay the loan.

How much can you afford?

The first step is to do a budget and find out how much you can comfortably afford to repay each week or month. Make sure you allow some leeway for unexpected costs, such as medical or dental bills and car repairs.

Don't be tempted to take on more debt than you need or can afford. If you run into problems repaying a loan, your credit history may be affected and you may have difficulty borrowing money again in the future, forcing you to borrow from lenders who charge higher interest rates.

No matter how big a loan you are offered, the questions you need to ask yourself are:

do you really need the loan or could you save up instead?
how much do you need to borrow?
will you be able to afford the repayments, even if you lose your job or your hours are reduced in work?

How long should you borrow for?

The longer your loan lasts the more it costs you in interest, so don't borrow for longer than you need to. Try to match the term with the reason for the loan, for example:

if you borrow for a holiday, aim to have it paid back before your next holiday
pay off your car loan over three to five years
if you need to, you can spread out the cost of larger loans, such as home improvement loans, over a longer term such as five to seven years because the benefits last longer.