You are an individual planning to take out a loan or credit soon, whether it is an installment loan or a mortgage. You are wondering what documents will be required to apply for a consumer credit or a mortgage loan. Additionally, you have a securities account, various movable and immovable investments, as well as a savings account, and you would like to know which incomes will be considered to assess your creditworthiness. Let’s quickly clarify these questions.
What is my contributory capacity?
The credit institution or credit company is obliged to grant you credit responsibly, which means analyzing your contributory capacity so that the credit granted does not exceed the financial means you have and will allow you to repay this credit. In terms of credit, there is a simple principle that your borrowing limit is determined by your contributory capacity, which means all the financial means a person can mobilize to repay a credit while still being able to repay any other credits and meet the daily, ordinary expenses of life.
The first obligation of the broker is therefore to inform you of the amount you can borrow in regard to all your available income. Thus, the broker may be led to temper a client’s wishes by drawing attention to the limits of their budget. A dialogue is thus established between the broker and the client about the project the client plans to carry out. The borrower may sometimes have to delay the completion of certain works if the desired amount exceeds their contributory capacity.
To what extent can I count on the income generated by my investments, my securities account, and my savings account?
Movable investments made through banks, brokerage firms, investment companies, or insurance companies should, in principle, generate periodic income. Thus, a savings account generates annual interest. Bonds, government securities, and even some stocks produce annual interest and dividends.
These financial assets can indeed be considered to determine and assess your contributory capacity.
However, we must always remember that these financial assets may present a certain degree of risk (this is particularly true for stocks but also for high-yield bonds). Therefore, the credit institution or company cannot solely rely on the production of such assets to grant you credit.
Generally, what incomes are considered to determine my contributory capacity?
To determine the amount of credit you will be able to borrow, a broker will consider the following incomes:
- Your professional income;
- Your rental income (limited to 80%);
- Your investment income (savings account, securities account, investments).
What incomes are never considered for the granting of credit?
For reasons of legal insurability, a credit institution or company cannot consider the following incomes:
- Family allowances;
- Unemployment and CPAS benefits;
- Alimony payments (however, these positively influence the profile of an application).
