Long-standing short-term loan provider Cashfloat has explained why affordability assessments form a core aspect of its application evaluation process, and why, following a jump in individual insolvencies in quarter one of 2026 to 35,143 in England alone, it is advisable that other financial services firms follow suit.
Overall consumer credit has also risen by 8.8% from a year ago, including credit cards, loans, and other advances. These figures indicate that more households are borrowing and that lenders need to ensure that all approved loans are unlikely to cause financial distress for applicants with strained budgets.
The background of affordability analyses during elevated living costs
The cost-of-living crisis is not recent news, but an ongoing scenario. Everyday outgoings, from food to fuel and utilities to interest rates, have been increasing and staying high, while incomes have not kept pace. This has, inevitably, been one of several factors contributing to the increase in consumer credit.
While credit scores remain a useful way to gauge the health of an individual’s financial profile, there have been ongoing efforts to encourage more lenders to adopt a similar approach to Cashfloat’s, focusing on affordability as a key benchmark.
The Financial Conduct Authority (FCA), the UK regulator, indicates that:
- Creditworthiness should be assessed before any regulated lending product is offered, including whether the consumer can afford the repayments.
- Lenders should use their judgement to ensure assessments are proportionate and relevant and align with principles of treating customers fairly.
- Scores from Credit Reference Agencies (CRA checks) are often incorporated, but lenders aren’t obligated to use or rely on them and must use their judgement about which information is most applicable in any given assessment.
CRA checks aren’t a regulatory obligation, but affordability appraisals are, which is why forward-thinking loan providers have made affordability the cornerstone of their responsible lending policies, without reliance on the estimated measured creditworthiness of a consumer based on a credit agency’s scoring.
Cashfloat’s affordability evaluation process for loan applicants
Chief Operating Officer Peter Kimpton from Cashfloat explains that:
Affordability isn’t just a tick-box task, but a hugely vital aspect of lending to any applicant, because if a household or individual cannot afford the repayments they are committing to, there is a very real risk they could find themselves in financial hardship.
This is something we as lenders can prevent by conducting fair affordability assessments. If a loan isn’t clearly affordable, we can then offer advice, guidance or signposting if there are indications of debt dependency or financial difficulties.
The short-term loan specialist reviews a broad range of information to verify whether or not there is sufficient evidence that a loan will be affordable for the duration of the repayment period, including:
- Income and expenditure, alongside existing financial commitments
- Essential living costs and the impacts of proposed repayments on day-to-day finances
- Previous borrowing applications or habits
- How much outstanding credit an applicant already has
By considering this broader picture of a consumer’s financial well-being, alongside information held on file by CRAs, including details of current loans, the provider can reduce the risk of a consumer applying for unsustainable borrowing and ensure decisions are equally responsible and fair for all.
One of the many resources that is freely available on the Cashfloat website is a Loan Affordability Calculator. This is designed to help prospective applicants check whether or not they are likely to qualify for a loan they are intending to apply for, based on their financial position.
Consumers can enter their net monthly income, number of dependents, and average expenses for outgoings such as rent or mortgage payments and utility bills. The calculator generates an estimate of the loan value they may be able to afford. This is accompanied by a suggested loan duration and monthly repayment costs, and an indicative acceptance rate.
These results don’t guarantee a loan will be approved or rejected, but they provide valuable insight before consumers decide whether to apply and are followed by tips and signposting links where relevant.
About Cashfloat
Cashfloat is one of the UK’s leading direct lenders. We provide online loans for people with all credit scores. Cashfloat is fully authorised and regulated by The Financial Conduct Authority.
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