Cashfloat explains how UK affordability checks work

Cashfloat is advising borrowers in the UK on what lenders look for during short-term loan applications and why affordability checks can feel intimidating for first-time applicants. The lender says clearer guidance and Open Banking can speed approvals while helping consumers make more informed borrowing decisions.

Why it matters: - Short-term borrowing is part of everyday budgets for many UK households, including an estimated 15% of adults, 28% of couples with children and 33% of single parents. - Clearer loan application guidance can reduce stress, help borrowers prepare in advance and lower the risk of missed payments or debt reliance. - Responsible affordability checks matter because lenders must decide whether a loan is manageable before approving it.

What happened: - Cashfloat, an authorised UK direct lender, issued guidance for consumers on what to expect during the loan application and affordability assessment process. - The lender has offered responsible short-term loans since 2014 and says it has served thousands of customers. - Cashfloat said its goal is to improve understanding of how loans work and how lenders assess applications.

The details: - First-time borrowers may be unfamiliar with credit checks, affordability assessments and self-declarations of income and expenses. - Lenders must confirm a borrower’s regular income and where it comes from, including employment, benefits, child maintenance or self-employment. - Lenders must assess regular outgoings and commitments, such as rent or mortgage payments, living costs, dependents and existing debts. - Lenders must verify that the loan is affordable and that repayments can be managed. - Loan providers also require permission to run credit checks, record age and employment status, ask the purpose of the loan and may request evidence of income or outgoings. - Cashfloat said borrowers can find the process daunting if they are not ready to share detailed financial information or provide documents such as payslips. - Cashfloat uses Open Banking in its loan application process and focuses on affordability checks to assess repayment capacity. - Chief Operating Officer Peter Kimpton said Open Banking can speed checks, improve security and reduce the need for lengthy forms. - Kimpton said borrowers can choose when to permit Cashfloat or another lender to communicate with their bank. - Open Banking uses APIs and bank-grade security protections to share information in real time without storing data or creating an ongoing link between organisations. - Consumers choose what data to share, the permission expires after 90 days and consent can be withdrawn at any time. - Cashfloat says Open Banking can confirm identity and affordability quickly and support responsible lending decisions based on current information. - Cashfloat was one of the first lenders to use Open Banking in loan application assessments in 2020. - Cashfloat said as many as 90% of short-term lenders now use Open Banking to some extent. - Cashfloat says explaining how Open Banking works and what data borrowers must disclose can make applications simpler and less stressful.

Between the lines: - The guidance is also a consumer education play, aimed at reducing uncertainty before applicants start the process. - Open Banking has become a competitive and operational standard in short-term lending, not just a niche feature. - The emphasis on data protection and borrower control reflects wider concern about sharing financial information with lenders.

What's next: - Borrowers are likely to face more digital affordability checks as Open Banking becomes more common across the sector. - Cashfloat is encouraging consumers to prepare financial details and seek support early if they are already struggling. - Customers in financial difficulty may benefit from free and independent debt advice before taking on more borrowing. - Cashfloat remains fully authorised and regulated by the Financial Conduct Authority.