There is no amount of credit assigned to a particular salary. Credit institutions and banks are interested in several criteria before accepting or refusing consumer credit. We will see that it is however interesting to measure its monthly repayment capacity, in order to make a consistent credit request.
What credit for what salary? A reducing question
It is impossible to reduce borrowing capacity to the level of wages . Consumer credit players (organizations, banks, insurers, etc.) always assess a loan request as a whole, taking into account a whole host of criteria. Here are the main areas of decision in the credit agreement:
- Personal situation
- Financial stability (permanent, fixed-term, retired, etc.)
- Current household expenses (rent, pensions, current consumer credits, etc.)
You have to ask yourself what is your monthly repayment capacity rather than thinking about which credit for which salary. Some individuals, for example, have a high salary, but also expenses that are difficult to bear. On the contrary, an individual paid at least but able to save may well consider financing a large-scale project. Applying for credit with a co-borrower can also play an important role in the final decision , since both wages will be taken into account.
The debt ratio, a benchmark indicator
It is more fair to ask oneself what one’s monthly repayment capacity is than to think about which credit for which salary. The debt ratio gives you a good idea of its repayment capacity. Here’s how to calculate it:
Amount of monthly loans x 100 / monthly net income (salary and other income) = debt ratio
Example: the amount of the monthly payments for a credit request is $ 250.00, and my net salary – excluding bonuses – set at $ 1,600. My debt ratio is therefore 250 x 100/1600 = 15.62%. This is acceptable, provided that my charges are not disproportionate.
The debt ratio is only an indicator: it in no way reflects the truth . However, we can say from experience that when it is higher than 33%, credit will be difficult to obtain. The multitude of criteria should not, however, prevent each applicant from carrying out a simulation. All cases are different, and the best way to get an answer is to perform a credit simulation with immediate response.