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Financial education
Being approved for a loan is not the same as being able to afford it. A simple calculation you can do before you borrow.
This article mentions borrowing. It is educational and is not a loan offer or credit advice. Loan terms vary by lender. Always read the full agreement and confirm you can repay before borrowing.
Lenders assess whether they will get their money back. That is a different question from whether repaying will damage your life.
You have to answer the second one yourself.
Step 1: What comes in each month?
Count what actually arrives, not what you hope for. If your income varies, use a below-average month — not your best one.
Step 2: What must go out each month?
Only unavoidable things: food, rent, transport, school fees, medical costs, existing loan repayments, utilities.
Step 3: Subtract.
What is left is your surplus. This is the only money that can service a new loan.
There is no universal rule, but a widely used guideline is to keep loan repayments to no more than a third of your surplus.
The remaining two-thirds is not spare. It is what absorbs the month that goes wrong — and a month will go wrong.
Before you commit, run the repayment against a month where something happens:
If the repayment is still payable, the loan is probably affordable. If a single bad month makes it impossible, the loan is too large — no matter what the approval says.
What is this loan for?
Borrowing to buy something that earns money — stock, tools, transport for a business — has a repayment source built in. Borrowing for something that consumes money has to be repaid out of a surplus that already exists.
Neither is automatically wrong. But they are different risks, and treating them the same is how people get into trouble.
What happens if I do not borrow?
Sometimes the honest answer is "a real emergency gets worse." Sometimes it is "I wait three months and buy it with my own money." Ask it explicitly, because the answer often changes the decision.
