Requests for bank loans have exploded in recent years. Customers are increasingly seeking to finance their projects or regularize their financial situation by opting for private credit. Faced with this trend, one question often comes up: how do you calculate the maximum amount of a loan? Here's a simple way to find out how much a bank can lend you. Let's find out together!
Calculating the maximum amount of credit: the debt ratio principle
Calculating debt capacity indicates the maximum rate a household can use to repay its monthly loans. This rate is equivalent to 1/3 of household income. This limit aims to maintain an adequate subsistence allowance so that families can continue to meet their daily expenses. As a general rule, the maximum borrowing capacity is therefore equal to 33 % of household income. This means that all monthly loan payments cannot total more than one-third of income. This borrowing capacity threshold of 33 % corresponds to the highest level of indebtedness for most households. Not exceeding the maximum credit limit is a mutual protection for lenders and borrowers.
First step in calculating the maximum credit amount
The first step is to calculate the household's monthly balance. To do this, we apply the following formula: total income minus total expenses.
To calculate total income, we add up the borrower's salary, additional income, annuities and all other sustainable sources of income. Total expenses include all the borrower's out-of-pocket expenses. This generally includes a lump-sum for living expenses, rent, health insurance, medical expenses and other expenses. existing monthly payments, In addition, we may be required to pay any alimony or child support, and any other expenses incurred by the household.
To sum up without tearing one's hair out, the maximum credit amount is calculated in advance using the following information:
- Total revenue ;
- And the total of all existing charges;
We've seen how to calculate your available monthly balance. Now let's move on to the next step to estimate precisely the maximum amount you can borrow.
Second step to find out the maximum credit amount
To find out how much you can borrow, simply multiply your available balance at the end of the month as follows:
As we saw earlier, for each household, the formula is determined on the basis of the difference between income and expenses. To put it simply : Income - Expenses = Amount that can be allocated per month to the repayment of a loan. However, there is still a maximum credit limit that can be granted. To find out, simply multiply your monthly balance by 32 (monthly balance x 32). Here's the complete formula for determining the maximum credit limit:
(Total revenues - Total expenses) * 32
Consequently, the maximum amount of credit granted will be the household's available monthly balance multiplied by 32.
Here's a numerical example to help you understand how the calculation works:
| Income list | CHF | List of expenses | CHF |
| Income from main activity | 4’500.- | Monthly fee for a single person | 1’200.- |
| Income from secondary activity | 300.- | Residential rent | 1’800.- |
| Alimony received | 500.- | Health insurance premium | 450.- |
| Monthly bonus | 350.- | Existing leasing | 350.- |
| Tax | 400.- | ||
| Total revenues | 5’650.- | Total expenditure | 4’200.- |
The monthly balance available is : CHF 5’650.- - CHF 4’200.- = CHF 1’450.-. To find out the maximum credit amount, multiply this result by 32: CHF 1’450.- * 32 = CHF 46’400.-.
In this example, the borrower will be able to apply for credit maximum of CHF 46’400.-.
Calculation of credit amount for loans over CHF 80’000.-
For amounts in excess of CHF 80’000.-, banks are no longer required to apply article 28 LCC. The content of this article concerns the maximum amount granted when calculating the budget. This means that banks can grant credit well in excess of the maximum amount based on the borrower's creditworthiness.
Asking for a loan beyond your financial capacity may result in rejection, even if you meet all the other conditions. Although article 28 of the LCC does not apply, banks use their own calculations to limit the risk of insolvency. That's why it's always best to seek the services of an informed intermediary before submitting your application. a request for financing. He or she will know how to prepare your file to maximize your chances of acceptance.
New factors come into play when calculating your budget!
Since 2015, the conditions for granting have become stricter due to the addition of new parameters in the budget calculation. This concerns, for example, childcare costs for people with children in their care, various travel expenses, lunches, etc. In addition to the above criteria, since January 2016, a safety margin has also been added to anticipate serious problems that could affect your health, professional and private life. These various factors mean that it's absolutely essential to enlist the help of a professional credit broker when you apply for credit.
My budget is good but the bank won't give me a loan!
Sometimes, despite a surplus budget, banks refuse to grant you a loan. Unfortunately, this happens when other criteria are not met. These are generally as follows:
- You have pending lawsuits and therefore a high risk of wage garnishment.
- Bad entries about you are visible in ZEK central file
- Or incorrect information has been provided to the bank when making a request.
In these three situations, the best thing to do is to stop all credit applications and contact Lica. Our experts will analyze your situation and advise you on the best way to obtain financing as quickly as possible.
Our conclusion on calculating the maximum credit amount
Quickly estimating your borrowing capacity is a very practical way of projecting your future goals. As we have probably demonstrated in this article, the formula is simple, but requires a good knowledge of your budget. In addition to this, there are a number of specific points you need to be aware of in order to maximize your chances of obtaining credit on advantageous terms.
Despite the existence of a simple formula, consulting a quality intermediary is advisable to maximize your chances of obtaining financing at the best market conditions for your project.
Now that you know exactly how to calculate the maximum credit amount, take the time to contact our specialists. They will guide you through the process in a neutral and confidential manner.