You owe a lot compared to your annual income

If you owe between 50% and 100% of your annual income it can be harder to get a loan. For example, if you owe £10,000 and your earnings are £20,000 per year – your annual debt ratio is 50%.

Some lenders may consider that you could become over-indebted. That is, a lender might think you owe too much compared to your income. There are strict rules set by financial regulators that means lenders need to be really cautious when considering affordability of a loan.

Tip: Pay off more than the minimum balance on credit cards. These are one of the most expensive ways to borrow. Consequently you’ll also end up paying less interest.