A woman calculates her borrowing capacity with Milenia in Lausanne.
07.03.2023

How do you calculate your borrowing capacity?

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.

 

 

 



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Let's take a step back

During the lockdown, the world of work experienced a real shift.

Companies had to adapt and various means were put in place to ensure the continuity of services, sales, and the very functioning of the organization.

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The famous cardboard box filled with a computer, a mouse and a screen that the employees took home...

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The less fortunate had to sit on an old table at the back of their bedroom.

Children screamed in the background and parents had to juggle their work responsibilities with those of being a mother or father.

Ah... What wonderful memories!

In addition, the schedules became confused. There was no beginning and no end. We were already connected before, but now the workplace had invited itself into our home, into the family, into our home.

However, not everything had to be thrown away.

The doctor's appointment, the receipt of the Zalando package, the visit of the plumber... What required us to take time off or organize ourselves differently simply fit into his work schedule, on site.

Above all, no more time wasted on the road or on the train. We earned two hours of our living every day. That's no small feat...

We weren't the only ones. Hundreds of millions of people around the world, by obligation or freely, switched to this new way of working.

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Finally, regular reviews were required to assess the effectiveness of telework policies and gather feedback from employees.

The big winners? Zoom, Teams, Skype, Webex... It was a good time and the number of users exploded

 

Video conferencing platforms

In order to establish clear and effective communication channels, it is necessary to have instant messaging and video conferencing tools to maintain smooth communication between team members. This transition is being made by different players who bring specificities specific to each sector.

You may have seen that.

Some companies will use the Zoom platform, which allows simple video conferences with a discussion thread, which is easy to use and not very connected to other services.

Others will use Microsoft Teams or Webex, which offer more integrated and secure business solutions.

Skype and Google Meet round out the market leaders, at least in Europe.

 

And what about employers?

The main fear of some employers during this pandemic?

Decreased productivity.

The prevailing thought was that employees, less supervised than before, would work less given this new organizational freedom.

The endless breaks, the last-minute shopping, the Netflix binging...

We're not going to lie, the majority of teleworkers have taken advantage of this to better combine professional and personal needs.

There have been many productivity studies, too many to mention here.

In the end, productivity dropped slightly on average, but this varied enormously depending on the functions and responsibilities.

Profiles whose tasks were recurrent completed their work more quickly and, not needing to do more, to take advantage of the time available to go about their personal business.

Others worked even harder, especially early in the morning, late at night, or on weekends.

Where some managers suffered from a lack of supervision (monitoring?) of their teams; Some employees did not take well to the distance, the lack of clarity on the establishment of rules... All of them missed interpersonal relationships and this may have impacted the corporate culture and sense of well-being.

In conclusion, there is neither one statistic valid for everyone nor a representative feeling of all employers and employees. However, there is no doubt that the world of work has changed and the effects continue today.

 

Exactly. And today?

Companies are adapting to the demands of employees, especially young people entering the workforce.

They demand flexibility, adapted schedules and, yes, telecommuting.

In Switzerland, the job market is in favour of job applicants. Companies must therefore remain attractive and take these demands into account.

Companies are implementing hybrid work modes that allow the employee more time to work from home but require them to be present for a certain number of days in the office. Again, there is no single rule.

Some organizations simply refuse the principle of remote work.

Others impose a fixed day of attendance.

Some leave the choice to their teams.

One thing is for sure, remote work is here to stay, in one form or another.

More than controlling productivity, more than managing teams and workloads, the real challenge is to keep the links between employees, to ensure proximity between managers and their teams.

Finding a balance between the attractiveness of the employer brand, individual well-being and the needs of the company; This is where the effort must be directed for the future.

 

At work and at home, Milenia is always available

Accessing credit through our financing platform has never been easier.

Everything is within your reach, with customization according to your projects, we accompany you from start to finish so that your projects can see the light of day.

For your personal loan, we offer the best market conditions with 0 application fees. Everything is designed to make your life easier.

Your loan application can be done entirely remotely, with support from your personal advisor or both at the same time.

The flexibility, adaptability, personalization of your offer... All of this is embedded in our approach and services.

As the leading credit player in Switzerland, place your trust in us so that your personal dreams and projects come true.

 

 

 

 

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Loan illustration: loan of CHF 10'000. Effective annual interests rates between 4.9% and 11.95% over a 12 month period lead to total interests of between CHF 261.80 and CHF 624.80. Duration: 6-120 months; Maximum annual interest rate (including all loan handling costs) 11.95%. Loans approval are prohibited if they lead to excess debt for the consumer. (Art. 3 LCD)

 

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