Borrowing · Canada
How lenders assess affordability
A plain-language look at income, existing commitments and the cost of new borrowing.
Before approving a loan, lenders in Canada look at whether a borrower can reasonably manage the new repayments alongside existing commitments. Understanding what they review can make an application less opaque.
Income and its stability
Lenders consider how much you earn and how reliable that income is likely to be. Salaried, self-employed and variable incomes are usually documented and assessed differently.
Existing commitments
Other debts, regular obligations and housing costs reduce the amount available for new repayments. Lenders often express this as a ratio of debt payments to income.
Testing the new borrowing
For some types of borrowing, lenders may assess whether you could afford repayments at a rate higher than the one offered. This is intended to leave room for changes in rates or circumstances.
Country context
This article refers to Canada. Lending rules and affordability tests vary between countries and lenders.
Editorial note
This article provides general information and is not personalized financial, investment, legal or tax advice.
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