How much can you afford to borrow?
Before taking a loan, it's worth checking what you can realistically afford — not just what a lender might offer. The debt-to-income ratio (DTI) is the key measure: the share of your income already going on debt. Keep it sensible and borrowing stays manageable.
What is debt-to-income?
Your debt-to-income ratio is your total monthly debt payments (including rent or mortgage) divided by your gross monthly income, as a percentage. Lenders use it to judge affordability:
- Under 36%: generally comfortable.
- 36–43%: manageable but watched closely.
- Over 43%: many lenders become reluctant to lend more.
From DTI to a loan amount
Start with your gross monthly income and apply your target DTI to get the maximum you should spend servicing debt. Subtract what you already pay on housing and other debts — what's left is your affordable new monthly payment. Working backwards from that payment, the APR and the term gives the loan size that fits.
Why approval isn't guaranteed
DTI is only part of the picture. Lenders also look at your credit history, employment stability, regular outgoings and run their own affordability and stress tests. Two people with the same DTI can get different decisions. Treat this as a planning tool, not a promise of approval.
Leave yourself a buffer
£35,000 income, modest commitments
On £35,000 gross (£2,917 a month), a 36% DTI target allows about £1,050 of total debt servicing. With £900 rent and £150 of other debt, you're already at the limit — leaving little headroom. Reducing the existing debt, or choosing a longer term, would free up affordable monthly capacity for a new loan.
Common affordability mistakes
- Borrowing the maximum offered. What a lender will offer and what you can comfortably afford are not the same thing.
- Forgetting housing in the DTI. Rent or mortgage is the biggest commitment and must be counted.
- Ignoring rate rises. Variable rates and future borrowing can push your DTI higher than planned.
- Not leaving an emergency buffer. Maxing out affordability leaves no cushion for unexpected costs.