The consumer loan guide is your guide to your project. Before and during consumer credit , there are a number of steps to know and respect.
Define borrowing capacity and repayment capacity
Before starting your research, it is important to know your borrowing capacity that comes from its ability to repay. The standard is not to exceed 33% of its monthly revenue in repayment. Depending on this repayment capacity and the duration of the credit, the credit amount will not be the same.
- Refund capacity
1/3 of your net income: so just divide your net income by 3.
Example: a household earns 3,000 USD, its repayment capacity is about 1,000 USD, the household can not exceed a refund of 33% all credits combined.
- Borrowing capacity
To calculate your borrowing capacity you first have to add all the monthly installments of your loans in repayment and subtract this amount from your repayment capacity. This tells you the maximum monthly payment that you can repay.
Thanks to our consumer loan simulator you just have to indicate the type of project you want, the amount and the maximum monthly payment you can support (previously calculated).
You will then know the duration of your credit, its APR and the total amount of credit.
- Debt ratio
To know your debt ratio simply take the sum of all your monthly payments and divide by your monthly net income and then multiply by 100. You then get your debt ratio, plus it is less than 33% more you can borrow.
- Personal contribution
The personal contribution represents the amount you are ready to allocate to your project and which will complete the financing of it. Indeed, the personal contribution allows you sometimes to be able to reduce the duration of borrowing and thus the cost of the credit in order to respect your capacity of indebtedness.
Net monthly income: USD 3,000
Refund capacity: 1/3 of 3 000 USD = 1000 USD
Monthly payments current credits: real estate 550 USD + auto 200 USD = 750 USD
Debt ratio: 750 / 3,000 = 25%
Additional maximum monthly payment: 33 – 25 = 8% ie 3,000 * 8% = 240 USD
Namely : the debt ratio of 33% is a standard generally applied by credit institutions, however, a lending institution has the right to refuse a request for funding even if the 33% are not reached. Banks thoroughly study the borrower’s profile and minimize their risk.
Choose your type of credit and financing
Different types of consumer credit are available. Depending on the projects and expectations of the borrower, it is important to choose them well.
Indeed, the credit allocated provides security where unaffected credit offers freedom. It is often advisable to prefer the credit allocated in case of large amount financing. The unallocated credit will be preferred for smaller sums and if the sum is for several different goods; for example you need a sum to buy different household goods since you change those of your kitchen.
Once the chosen credit and your known borrowing capacity you can file your consumer credit application.
Study the loan offer and decide
Once the offer or offers of loans have been received, they must now be compared. The comparison is always made with the APR which includes all fees but the options present in the contracts must also be compared (possibility of early repayment, deferral of maturities, …).
After the return of the selected offer, you have a withdrawal period of 14 calendar days
Realize your project
After 14 days of withdrawal, you can dispose of borrowed funds. Namely, that in the case of a credit affected, the funds will be directly paid to sellers or suppliers and the first monthly payment will be from the delivery of the project. In the case of an unallocated credit, the funds will be paid in one go directly to your bank account, the first monthly payment usually starts one month after the release of the funds.