A project that is close to your heart, but not enough income to finance it? Like many households, perhaps you are considering taking out a loan to make it happen. First of all, you should know that, whatever the type of loan envisaged (personal loan, mortgage), the calculation of your borrowing capacity is a crucial step. Besides, no bank will grant you a loan without ensuring that you can repay it.
To determine the amount that you can borrow, only one solution: make a borrowing simulation! We tell you what to do.
Borrowing capacity: what bag?
Borrowing capacity is the maximum amount you can get to finance your project. It is based both on your debt ratio (share of income devoted to repaying loans) and on your living expenses (deduction of income and charges).
The maximum amount of credit can however be influenced by several variables, such as:
- the rate applied;
- the repayment tenure;
- personal contribution;
- any outstanding credits;
- banking behavior;
- the profession.
The longer the repayment period, the higher the rate will be, and vice versa. This implies, of course, a higher or lower cost of credit. A loan simulation precisely modulates the duration of the loan, with the consequence of a decrease or on the contrary an increase in the amount of the monthly payments. And therefore, ultimately, a change in the total cost of credit.
Where and how to make a loan simulation?
Today, it is possible to calculate your borrowing capacity directly online. Many websites provide borrowers with a free calculator for this purpose. To find them, simply type on your search engine “borrowing capacity simulator”. In the search results, you will find banking or credit organizations, brokers, but also web portals specialized in finance or investment.
Some simulation tools are only dedicated to home loans. Others exclusively offer a simulation of consumer credit (personal loan, car or work credit, etc.). Others are more general. The ideal is to turn to a simulator in accordance with your project and as complete as possible from the point of view of the information to be given. Your estimate will only be more precise!
Supporting calculations, nothing simpler than carrying out your loan simulation to finally know the feasibility of your project. The data to be entered in the simulator may differ from one site to another. But in general, you will have to fill in:
- the net monthly income of the household before tax (that of the borrower and of the potential co-borrower);
- other monthly income before tax (premiums, food, allowances, annuities, etc.);
- monthly charges (rent payable, pension payable, income tax, housing tax …);
- outstanding credits (you will have to indicate the amount of the monthly payments);
- the desired amount of credit;
- the duration of repayment of the credit (to be changed as you wish).
Sometimes you may also be asked:
- your benchmark tax income;
- your personal contribution, especially for a mortgage;
- the location (for the estimation of notary fees) and the nature of the property (new, old), in the case of a mortgage;
- the loan interest rate (excluding insurance).
Once all the data has been entered in the fields provided, you just have to validate your request. Instantly, the calculation of your borrowing capacity will appear before your eyes. On some sites, however, you will have to enter your contact details to be able to receive the estimate by email. It’s up to you to decide whether or not you want to remain anonymous! But whatever the case, a loan simulation does not commit you to anything.
The three key points
Key points to remember about the loan simulation
Simulating your borrowing capacity allows you to know the feasibility of your project.
- The maximum amount that can be borrowed depends on the debt ratio and the amount of living.
- It is also influenced by the rate and duration of the loan.