How much loan can I afford?
The right loan amount is one of the most important criteria when concluding a loan. Nevertheless, many consumers take over and overprotect themselves. This is often due to the ignorance of how high a loan may be maximum, so as not to overload. This problem is compounded by online credit. Since individual advice on many online loans is not part of the service, many consumers are not sufficiently warned against over-borrowing. There are relatively easy ways to prevent this and to calculate the maximum loan amount. On the one hand, the monthly load limit has to be determined, on the other hand, it is also possible to calculate the maximum loan amount.
1. Lead the household book
The budget should be kept for at least several months. All current and spontaneous expenses are recorded and deducted from disposable income. The value can vary from month to month, so it is important not to keep the budget book short-lived.
The data is aggregated and divided by the number of months. This is the financial scope available monthly. In principle, this amount is the maximum amount that can be spent on a loan installment.
However, in order to avoid getting into trouble due to financial hardships or unforeseen purchases, it is important to plan for a margin. It offers more security, especially since not every month the same surplus can be scheduled.
In this way, the amount that can be conveniently used to pay off the loan. Since a loan should always be repaid as quickly as possible, borrowers must find a suitable middle ground for them. If the surplus is regularly similarly high, extras are already co-established and the income can be considered safe, the maximum repayment rate should be chosen calmly somewhat more generously. On a safety cushion can be waived.
For those whose financial situation is rather volatile, it is advisable to choose the monthly installments rather smaller and to make sure that special repayments are as favorable as possible when concluding the loan. In good times, money can be repaid and later used to repay the loan as soon as possible.
2. Calculate maximum affordability
The maximum affordability indicates which loan amount represents the absolute maximum and is relevant because of the amount above all in the mortgage lending. For this purpose, the financial capacity (average income less cost of living, housing (additional) costs, other fixed costs and a small reserve) is multiplied by 12 months and 100 and then divided by interest rate plus repayment (both in percent). This results in the maximum loan amount that the borrower can repay if his financial situation does not change.
Of course, in order to be financially viable, borrowers must be careful to include other potentially existing loans in the bill and to deduct them from the maximum amount for the new loan. Although only recommended in exceptional cases, the maximum amount of credit can be increased by:
- A guarantee
- Second borrower
- Payment protection insurance
However, the maximum loan amount should not be unnaturally driven up. The risk of the borrower taking on financial responsibility is too great.