You owe as much as your annual income

You owe more than 100% of your annual income. For example, if you owe £20,000 and your earnings are £20,000 per year – your annual debt ratio is 100%. This ratio does not include any mortgages.

Some lenders might consider that you are over-indebted. This is because they may think you owe too much compared to your income. Consequently, they may think that another loan will be too much of a burden.

Tip: paying down your debts is the only way forward. Most lenders charge fees for paying off a loan early (although credit unions don’t). Therefore, if you have them paying off credit card and overdraft balances is best as there are no early repayment fees.