The more you earn, the more you spend. That’s the common belief among lenders. Lenders also believe where you live determines your living expense. If you live in an affluent area, then your expenses are likely to be more than someone living in a lower socio-economic area.

These days, with open banking being becoming more and more available in the lending environment, you cannot hide how much you spend for living expenses. Living expenses are expenses for everything apart from your loan commitments and rent payments. They range from groceries, health expenses, transport expenses, insurances, clothing, recreational, eating out or in, and many more.

Why are living expenses important to the lender?

The lender relies on your income to determine how much you can afford to pay back to the bank. What if you spent all the income you earned? What if you liked to spend your income on luxurious items and dined out at restaurants every night. This means you wouldn’t have income left to pay your loan back.

How can you reduce your living expenses when applying for your loan?