A loan is often the only way to finance a major purchase, whether it is to deal with a material contingency or to buy a home. Find out the main factors that influence your borrowing capacity.
Banks are the main people you should talk to about getting a quick loan.
There are several factors that can influence the decision of banks and financial institutions whether or not to lend you money.
Here are some of the most important.
First of all, what is borrowing capacity?
Or in other words, how much can I borrow?
In fact, borrowing capacity represents a person’s financial capacity to support any kind of financing.
It allows you to plan your purchases in a reasonable and coherent way, whether it is for the present or for the future, and whether it is a credit for a major consumer good (car) or for a real estate loan (mortgage).
How is borrowing capacity calculated?
This calculation is based on the different monthly income and expenses of an individual or family.
The debt ratio
A person’s debt ratio, also known as the debt ratio, is a measure that calculates the percentage of a person’s debt in relation to their gross salary or earnings.
It is calculated as a percentage by dividing the total amount of debt by the total amount of assets.
- The higher it is, the more it means that the person is in debt and is not able to pay off his or her debts.
- The lower it is, the more it means that the person is able to deal with financial contingencies and keep debts under control.
The debt ratio should not exceed 40% to be considered good or reasonable.
For example, as a general rule, banks and credit companies do not accept applications for financing from families with a debt ratio of more than 33%.
A tool for analysis
This calculation tool is often used when analyzing your file to determine whether or not you are able to repay a loan.
If you are already financially tight, chances are that you will not be able to repay another loan, and therefore most banks will refuse you a loan.
Solutions for people in debt
Of course, all these tools are only indicators. This does not mean that people who do not have a good rating, score or debt ratio cannot borrow.
It simply means that they will not be able to do so by turning to traditional banking institutions. For any loan of £750 or more, they have to turn to private quick-lending companies that provide loans to individuals without a credit check.
Another solution would be to find a bank to restructure all your debts.
However, it is not easy to do this alone as it is a complex operation. The best advice would be to use specialized brokers. Favour national and recognized firms.
But in case of over-indebtedness, if all your attempts to renegotiate have failed, you still have a last resort.
Your wisest decision would be to build up your file with the Bank of Great Britain over-indebtedness commission. Please note that you will be registered with the FCIP for a period of 5 years.
Do your homework and calculate your borrowing capacity and debt ratio.
You will then be better informed and equipped to :
- to deal with any financial eventuality
- find the best solution adapted to your needs
- better negotiate your loan.