Many banks regularly receive the question ‘what can I borrow’, something they can provide an excellent answer to. The answer depends, among other things, on the level of income, in relation to the fixed financial obligations.
It is also important, for example, whether you have already taken out other loans and whether, for example, you have fallen behind with a loan in the past. Is that the case? Then that offers some uncertainty for the bank, which means there is a good chance that you can borrow less. The answer to the question ‘what can I borrow’ follows from the certainty that the bank has that you will actually repay the loan amount. The more certainty you can offer (in addition to a high income, a fixed telephone number and a house to buy also help) the greater the chance that you can actually get the amount you want in credit.
Amount of income
The level of income is a very important factor in answering the question ‘what can I borrow’. After all, the higher your income, the more funds you receive each month to pay the interest and repayments. For example, when you borrow $ 10,000 and want to repay that amount in 5 years, at 7% interest per year during the first month you pay around $ 58 in interest, in addition to another $ 167 in repayment. Only if your income offers sufficient room to pay these two amounts, will the bank agree with your application and you have the option to borrow it.
Fixed financial obligations
Your income is offset by a number of fixed financial obligations. Do you want an answer to the question ‘what can I borrow’? In that case, you must deduct the amounts that you must pay each month from the income. This naturally includes housing costs, the car and insurance, but also, for example, alimony. In this way, the bank tries to form a picture of the amount that you ‘keep’ each month, which you can spend as it were. You can use this amount to pay the interest and repayment, which means that it must be sufficiently high.
Calculate and apply for a loan
You can calculate your loan yourself online, to find out what you can borrow and then apply to the bank on that basis. In this way you can provide an answer to the question ‘what can I borrow’, so that you already have an answer to it before actual contact with the bank. Does it appear that you can borrow less than you thought, or can you borrow much more? You can take this into account when you make the actual application. The more realistic the application, the more value the bank will attach to it.