Mortgage lenders use different rules to work out how much they can lend. For example, some of the business rules can be:

• Single Applicant – Three times the borrowers annual salary – sometimes more
• Joint Applicants – Two and a half times the joint salaries, or three times the  higher salary plus the lower salary.

Lenders base their loans on the borrower’s gross income before tax. This can sometimes include regular overtime or commission. They also look at the regular outgoings (expenses), like:

• Payments on other loans
• Service charges on the property
• School fees for children

If your bank account regularly goes over your arranged overdraft limit, you will have to pay extra interest and charges. Your bank could also cancel your overdraft limit or refuse to renew it when your agreement runs out. If you lose control of your bank account, it can become very difficult to manage your business and household finances.

Unpaid cheques, direct debits and standing orders will make your debt problem worse and any money paid into your bank account may be taken up by interest and bank charges instead of covering payments you need to make. You may find it easier to change your overdraft into a loan. Remember, you may lose your overdraft as the bank will often make it a condition of the loan that you keep your current account in credit. You will also be committed to making payments towards the loan each month. Make sure you can afford this and make sure the interest rate on your new loan is no higher than the overdraft rate was.

Employers may choose to make available loans to employees for a variety of reasons. Often the loan agreement asks for repayments to be made through deductions in the payroll system.

An employer is responsible for:

• Making deductions of the amounts specified by the Loan agreement
• Keeping records of the deductions made
• Ensuring the deductions reduce the loan balance.

The payroll provides a system to deal with the administration of loans through the payroll.