How do annual income calculations differ from repayment income calculations?

Annual income calculations and repayment income calculations serve different purposes and utilize different components of a borrower's financial profile, leading to a significant distinction between them.

Annual income calculations encompass a broad range of income sources, including wages, bonuses, and additional income types, which can present an inflated picture of a borrower’s financial situation. This figure is often used for determining eligibility and can factor in seasonal income and other fluctuating sources, resulting in a higher overall annual income.

In contrast, repayment income calculations focus specifically on the stable, recurring income that is deemed available for debt repayment at the time of loan evaluation. This often excludes non-regular income sources such as overtime and bonuses, which can be inconsistent or not guaranteed. As a result, the repayment income is typically lower, reflecting the borrower's more reliable ability to make monthly payments based on income that can be depended upon consistently.

Understanding these differences clarifies why the annual income calculations are usually higher than repayment income calculations, providing insight into the borrower's financial landscape for both loan eligibility and repayment capability assessments.