Do you know how much your project will cost you? Now you need to check your debt ratio to see if the bank will accept your request for funding. Indeed, if you are already too indebted, the bank will refuse to finance you. To decide, institutions calculate the ratio between your expenses (rents, pensions paid, loans in progress…) and your income (net salary, pensions, pensions, certain social benefits, profits, rents collected…). Financial institutions generally require that the debt ratio does not exceed 33%.
The calculation of the debt ratio
Example: if your net income per month is € 2,000 and your monthly expenses are € 500, your debt ratio is 25%. You will therefore be able to take out a loan that will take you up to a maximum of 8 points.
The limit of 33% can be raised if your remaining to live is sufficient. Loan agencies will be more flexible if you have significant income. To find out your level of indebtedness, the Credit Guide suggests using its calculator debt ratio.
Establishments also favor the calculation of the family quotient to determine whether or not the family can take over a loan. Here’s how to calculate the family quotient:
Monthly Family Quotient = Reference Tax Revenue
(12 X number of tax shares)
If the family quotient of your household per year and per person is below € 4,500, the institutions will refuse to finance you.
If you are an employee of the public service (teachers, gendarmes…), the lenders will generally be more tolerant if you go over 33%. This indulgence is explained by the status of the civil service, which is generally more stable in terms of employment.
Protect me from over-indebtedness
The debt limit of 33% is used to prevent over-indebtedness. You must check your repayment capacity before taking out a loan. However, no one is immune to a decline in income following a change of situation (example: job loss, separation, retirement, etc.).
There are solutions to help you get out of debt if you have multiple loans. Indeed the redemption of credits is a way to consolidate all your debts and reduce your monthly payments.
But if you can no longer repay your credits, you can file an over-indebtedness file with the debt commission in your area. This one will study the file which you will have transmitted to him. If it is considered admissible you will benefit from a debt reduction plan according to your situation.