And especially your ability to repay it without difficulty and without affecting your budget and quality of life.
Among the few determining criteria that we will briefly recall in this newsletter, the debt ratio will certainly be the determining criterion.
A brief overview of the question now
What are the determining criteria for obtaining a favorable decision on your loan application?
Our brokers will examine several key criteria:
- The first criterion will be to ensure your solvency: to do this, our brokers will verify that your professional or other income is sufficient to allow you to repay the requested loan and those that may already be in progress;
- Being employed under a permanent contract is very important;
- You will be asked to provide your last three pay slips and your bank statements that prove your professional income is indeed deposited into your bank account;
- You will also be asked to declare all current credit contracts;
- It will be verified that you are not listed or that the removal of your listing at the National Bank of Belgium is indeed more than a year old;
- Our brokers will analyze your debt ratio.
What is the debt ratio?
The debt ratio is the percentage that your financial commitments (debts, ongoing credits) represent in relation to all your income. It is calculated using the following formula:
Total of your debts or monthly installments to be repaid / total of your monthly income X 100 = ….%
For example : Mr. François Castel is employed in a service company. He receives a net monthly salary of €2,750. He pays each month: €1,250 for his mortgage loan, €350 for his car financing, and €278 for a personal loan.
His debt ratio is therefore: Total of his monthly charges = €1,878 / total of his professional income = 2,750 X 100 = a debt ratio of 68%
Debt ratio analysis
To obtain a new loan, the debt ratio must range from 30 to 50% maximum.
If the loan applicant is not a homeowner, the debt ratio cannot exceed 40%.
On the other hand, if he is a homeowner, the debt ratio can reach 50% maximum.
In the example of Mr. François Castel, he will no longer be able to borrow because his debt ratio of 68% is much too high.
Are there alternative solutions?
Of course, when a person repays several loans taken out in isolation, it is always advisable to proceed with a credit consolidation to have only one loan.
In the case of Mr. François Castel, our brokers will carry out a credit consolidation within the framework of the mortgage loan which will allow Mr. Castel to repay only one monthly installment, which will be much lower than the sum of the three installments taken in isolation.
Thus, through a credit consolidation, Mr. Castel’s total installment will amount to €1,450. This represents a debt ratio of 52%, which could allow the subscription of a small additional loan that will be included in the same and unique loan.
Do not hesitate to contact our brokers for more information…
Do you want to face an unexpected event but don’t know what the maximum debt ratio is? Whether it’s for consumer credits, mortgage loans, ongoing credits, credit buybacks. Or a consumer credit. Crédit Populaire Eurpéen helps you at all times and takes into account your borrowing capacity. Depending on the financial situation, net monthly income, alimony, whether you have a co-borrower or not.
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