Working with your disposable Income

Your monthly disposable income is the money left at the end of each month after all your living costs, priority debts and bills have been deducted. Some companies (such as some loan companies and debt management companies) may use your disposable income to help them determine what you could afford to pay to your credit commitments.

This page gives a brief guide of how disposable income is worked out.

Working out your income

You should work out your income on a monthly basis as this would be how most people’s bills are paid.

If you get paid weekly, multiply your weekly salary by 52 and divide it by 12. If you get paid 4 weekly, multiply your income by 13 and divide it by 12. This shows your approximate monthly income.

When working out your income, if your monthly income fluctuates, don’t take the lowest or highest amounts you may get each month but rather an average of what your normal take home pay might be. If your income varies greatly, it may be best to speak to a loan adviser to help work this out.

Your committed outgoings

Your committed outgoings are what you pay each month in order to live and could include:

  • Mortgage or rent
  • Secured loans
  • Council Tax
  • Electric, Gas and other utility bills
  • Telephones
  • Car expenses
  • Work travel
  • School fees (school dinners, kids travel to school)
  • Food
  • Clothing
  • Pet allowances
  • Priority debts

This is not an exhaustive list but the main things to be considered are listed above, we have a page on priority debts which may help you understand how these should be treated.

After you have added all your outgoings together, they would be deducted from your regular monthly take home pay.

What’s left is your disposable income.

With regards to lenders, if they have done an income and expenditure exercise, they may use your disposable income as the maximum for any credit repayments per month. If a new loan totals less (including any other unsecured credit) than your disposable income, they may deem the new loan affordable.

Request a Call Back