Definition
Ability to repay is whether you can realistically afford a loan's payments out of your income and resources. Lenders assess it as part of deciding whether to extend credit.
Ability to repay refers to your capacity to meet the scheduled payments on a loan given your income, expenses, and existing obligations. It is a central concept in responsible and, for certain products, legally required lending standards, and it is often evaluated using measures such as the debt-to-income ratio along with verification of income. Assessing ability to repay focuses on whether a loan fits your budget, which can be considered alongside or instead of a credit score. The goal is to align the loan's payments with what you can sustainably afford.
