Your borrowing capacity is intrinsically linked to a maximum debt ratio. Let us explain.
I want to finance a project but I don't have the necessary funds
We all dream of winning the lottery from time to time, but let's be honest, it's not going to happen tomorrow. However, there is no shortage of projects and the desire to carry them out is strong. A vacation, a new car, a property renovation that is slow to happen, a wedding...
Trying your luck at the Montreux casino is not the solution either. At best, you can afford a ride on the merry-go-round at the Christmas market.
That's why financing platforms offer loans tailored to our needs. However, before rushing headlong into it, it is advisable to take a look at your finances and do a quick calculation before submitting your application.
What for?
First and foremost, to prevent your dream project from turning into a nightmare. Caution is advised, and you need to be prepared. In a nutshell, you have to calculate.
Calculate your income, expenses and only then simulate the amount that can be borrowed.
In addition, making multiple applications to various providers reduces your chances of obtaining credit. We have been able to tell you about this in previous articles, so you now know that each request is recorded in databases used for financial institutions' decision-making.
A lot of applications in progress = no chance of acceptance.
I think I can repay a loan. How can I be sure?
Do you think? You better be sure.
Let's roll up our sleeves and get out the calculator.
First of all, you should know that lenders are required to comply with the Consumer Credit Act .
It was created to avoid cases of over-indebtedness.
The principle is simple. Any application for a personal loan will be automatically refused if a repayment capacity is deemed too low or a debt ratio is, conversely, deemed too high.
The reasoning is sound and any actor responsible for credit must stick to it.
Debt ratio
It is commonly accepted that a debt threshold must not be exceeded in order for the applicant party to have a minimum amount of funds to live on.
Living means paying your rent, utilities, health insurance, taxes, energy bills and everyday expenses.
In short, taking out a loan cannot relieve you of your obligations and commitments to your creditors.
Let's keep it simple. Let's imagine that this rate is set at 30%.
Take the entire household income.
By income, we mean your salary, of course, but also any annuity, property income, etc.
Then take all of your charges.
We're talking about all your charges, without exception. This, of course, includes loans and credits that are already outstanding.
Then simulate the amount of credit you want. It's easy, simulators exist on the internet. Enter the amount, the imagined repayment period and take note of the monthly repayment. This monthly payment already takes into account the interest added to your loan.
Are you there? Do you have the calculator handy?
Add your monthly charges to the monthly loan payment to be repaid.
Multiply by 100.
Divide the result by your total monthly income.
The result is your debt-to-income percentage.
Are you below the threshold? Good.
Are you above the threshold? You're going to have to revise your copy.
I'm over the threshold. There's no other way?
If you are just over the threshold, you have room to manoeuvre. Try to adjust the repayment period of your loan. If you extend it, your monthly payments will go down as well as your debt ratio.
However, consider the impact on the interest rate applied.
If you're well above the threshold, unless you're generating additional fixed income or lowering your fixed costs, it's best to review your project and the amount borrowed.
In some cases, you will have to postpone your wish to achieve it and wait to be in a more comfortable financial situation. Reason and prudence must prevail when it comes to funding.
Of course, experts such as those at Milenia can also advise you. In the event of over-indebtedness, there are solutions to consolidate your debts and negotiate a payment plan with your creditors. Act before it's too late!
That's all?
When you are satisfied with your repayment capacity, this will of course be checked by your financing partner as well as by the lending bank.
You will need to provide the necessary documents for this verification in due form.
Which documents?
Your payslips
Your lease
Contracts for current loans
Your supplementary pensions
Invoices for your fixed costs
...
In short, all the evidence you need to accurately calculate your monthly repayment capacity.
As explained in previous articles, you must also be of legal age, reside in Switzerland, be exempt from prosecution, etc.
How can I benefit from good borrowing conditions?
In recent months, interest rates have been rising. This makes it all the more important to use experienced advisors.
What is the legal framework? What databases record your financial capacity? How do I put together a file quickly and completely? What supporting documents are needed? How to apply?
All these elements that, when you are well advised and accompanied, will allow you to increase your chances of obtaining a positive response.
This type of financing platform also benefits from an efficient network of partner banks.
The number of partners, the quality of the relationships established, the number of cases handled; These elements will allow you to compete with various rates offered so that you can, in the end, take advantage of advantageous conditions.
So take a good look at your finances, calculate your theoretical debt ratio, get sound advice and build a solid file.
You will then be able to carry out the project of your dreams, with peace of mind and respecting your budgetary reality.
