Calculating Affordability on Loans for NHS Workers

Affordability is one of the words you might hear bandied about when you apply for a loan. But it’s not just another bit of jargon. In this article, we’ll explain why affordability is so important both to you and us, and how it’s calculated for NHS workers.

Why affordability matters

As a responsible lender, affordability is at the heart of every loan decision we make. Far more than a box-ticking exercise, it’s a way of ensuring you can manage your repayments comfortably without adding unnecessary stress to your finances. For NHS workers who already juggle demanding schedules, unpredictable shifts and rising living costs, safeguarding financial wellbeing is especially important.

In short, affordability matters because it gives a fuller, fairer picture of your financial situation. While your credit score provides helpful background, it doesn’t tell the whole story. Two people with identical credit scores may have very different levels of disposable income, financial commitments or monthly expenses. That’s why our approach looks beyond the numbers.

By focusing on affordability, we’re able to assess every loan application on a case-by-case basis, taking into account your real circumstances, not just automated criteria. This means we can consider things like irregular shift patterns, variable income from overtime or temporary financial pressures. It allows us to tailor decisions in a way that supports you, rather than restricting you based solely on your past borrowing history.

Find out more: Why Choose A Credit Union As An NHS Employee

5 key factors that affect affordability for loans

Here are the main factors that come into play when calculating affordability for NHS staff:

1.    Income

For NHS workers, calculating monthly income isn’t always as simple as taking the base salary. Many roles involve variable shifts, overtime or other enhancements. When assessing affordability, lenders and credit unions typically look at:

• Base salary: The fixed amount stated in your NHS contract, usually paid monthly.
• Overtime and enhancements: Additional earnings for extra shifts, night work, weekend work or bank holidays.
• Bonuses or allowances: This might include high-cost area supplements (such as London weighting), on-call payments or other role-specific allowances.
• Other income: This can include income from a second job, rental income or regular maintenance payments.

Lenders generally use an average of recent payslips to get a realistic picture, which helps account for fluctuating shift patterns.

Related: Budget Health Check: Money Advice for NHS Staff

2.    Expenditure

Your outgoings are just as important as your income when assessing loan affordability. These are the regular costs you must cover each month, such as:

• Rent or mortgage payments
• Utilities (gas, electricity, water, council tax)
• Transport costs (fuel, public transport, parking)
• Food and household expenses
• Childcare or family support
• Insurance and subscriptions

For NHS workers, it’s worth noting that costs vary significantly depending on location. For example, staff living in London or the South East often face higher housing and travel costs compared with workers in other regions. We’ll factor in these differences to understand what you have left over for repayments.

3.    Debt-to-income ratio (DTI)

The debt-to-income ratio is one of the key indicators that lenders use to assess affordability. It measures how much of your monthly income already goes toward paying existing debts.

Think of it like getting paid with a pizza. We don’t want to know how big your pizza is. We need to know how much of it is left after creditors have taken their slices.

Here’s how it’s calculated:

Your debt includes credit cards, personal loans, car finance and other regular repayments.

• A lower DTI suggests you have more disposable income and are better able to manage new borrowing.
• A higher DTI signals a bigger financial burden, which could limit the amount a lender is comfortable offering.

Of course, we’ll always assess risk carefully. But members often find their credit union to be more flexible than high-street lenders, especially when facing temporary financial challenges.

4.    Credit history

Your credit score and overall credit history can often influence both the amount you can borrow and the interest rate you may be offered. Lenders review factors such as past repayment behaviour, use of credit and any missed or late payments.

For NHS workers with less-than-perfect credit, credit unions like Metro Moneywise can be a reassuring option. As a member-owned, not-for-profit organisation, we are:

• More understanding of financial difficulties
• Willing to consider the full picture, not just the credit score
• More flexible with repayment arrangements
• Focused on supporting financial wellbeing rather than generating profit

This usually makes us a more accessible choice for those rebuilding their credit.

5.    Loan term

The length of the loan has a direct impact on affordability:

• Longer loan terms spread repayments over more months, reducing the monthly cost. This can make budgeting easier, especially for workers with variable income.
• Shorter loan terms mean higher monthly payments, but lower total interest paid overall.

Choosing the right term involves balancing manageable monthly repayments with minimising long-term costs. We can help members review their options to find a term that fits their circumstances.

Calculating affordability: a simple guide

Working out whether you can comfortably afford a loan doesn’t have to be complicated. If you want to get a better idea of your affordability before applying, here are three simple steps to follow.

Step 1: Calculate your monthly income

Add up all the income you receive each month, not just your basic salary. Using an average of your last three months’ payslips can give a more accurate picture, especially if your shift patterns vary.

Step 2: Add up your monthly expenses

List all your monthly outgoings, from rent or mortgage payments to regular spending like eating out or hobbies. Being as honest and thorough as possible will give you a clearer view of your financial position.

Step 3: Subtract expenses from income

Subtract your total monthly expenses from your total monthly income.
This will give you the amount available each month for savings, unexpected costs or loan repayments. Also known as your disposable income.

Once you have this figure, simply compare it to the monthly repayment amount your lender has given you (or contact lenders to get estimated repayments). It’s recommended to keep loan repayments within 50% of your disposable income. Any more than that isn’t usually responsible.

Need any help? Speak to our team

Because it’s part of our common bond, anyone who works for the NHS can join Metro Moneywise Credit Union to save, borrow and get lifelong financial support. If you’d like to find out more about loan affordability, you can become a member and contact our team to talk through your circumstances.