Do you want to buy a car or a house or borrow money for vacations or a wedding but you do not know what amount you are entitled to? There are many criteria that play a role in assessing your repayment capacity. Keep this in mind.
The online simulation of a loan can give you the impression that your loan application will be approved immediately. That is not true. The credit institution analyzes your repayment capacity before you can borrow money. There are even cases where the credit institution is obliged to refuse your loan application. What are you doing then?
The bank has the right to refuse a loan application
It is a painful experience that it is difficult for you to accept, but the bank must refuse a loan if it is of the opinion that you cannot provide sufficient repayment guarantees.
The credit institution takes these types of decisions based on objective criteria: your situation and your application (amount and purpose). Moreover, the credit institutions also have legal obligations and must refuse your loan if your debt ratio is already too high with your current charges.
Right to a loan: earning a good living is not enough
The bank will analyze the credit application based on your current and future life situation. Based on these elements, the decision is made whether or not to grant you the loan.
What the credit institution will certainly ask you:
- your income: salary, income from immovable property or other income;
- sustainable income: contract of indefinite or fixed duration, interim work;
- your current loans;
- Whether you borrow on your own or with a co-borrower.
The institution will determine your borrower profile based on that information. The institution will also check whether you are on the black list of the National Bank of Belgium as a bad payer.
Your repayment capacity may change
Your current and future situation is also taken into account. Do you live together, alone or with your parents? Are you a young student, are you already working or are you about to retire? This information about your situation gives an indication of your current and future income and expenses;
If the simulator indicates that you will have a monthly repayment of $ 200 over 5 years, that may not seem like much to you at the moment. But the bank must look at your capacity to repay this monthly sum for 5 years. Every serious lender therefore analyzes your current and future situation. The target? Assess the possible changes to your situation as a borrower, in a positive or negative sense.
Duration and nature of the loan: their role in approving the loan
Of course you want to make your purchase very happy and you can be sure that you currently have the option to repay the loan. However, the bank looks at your situation in the long term.
The bank can decide to lend you money in function of, among other things:
- The duration of the requested credit;
- The purpose of your credit;
- The logical ratio between the goal and the amount;
- Your profile as a consumer.
The bank will be more inclined to grant a credit for the purchase of a car, a tangible item, than for a personal loan. That is why the interest rates for a car loan are also lower than those for a personal loan.
What to do when I am not entitled to a loan?
Do you want to make your purchase but you don’t have the means? There are a handful of other solutions:
- Review your purchase: you abandon the purchase, you first try to save more or you decide to buy an alternative that is less expensive. You may therefore also have to borrow less. In addition to cars of $ 30,000, you can also opt for a second-hand car of $ 10,000;
- Earn more: you work more hours and if you have time left, you can still become self-employed in a secondary occupation;
- Ask friends to lend you money, although that is certainly not the best solution;
- For the purchase of real estate: turn to a social credit institution such as the social credit companies in Brussels, the social housing credit in Flanders or the Société wallone du credit social in Wallonia.
At Elantis, we advocate responsible and affordable loans. According to our charter, we do not borrow money when there is a risk of debt accumulation. Our online credit simulator gives you an idea of your monthly repayments but our specialists will give you the best advice before allowing you a possible loan.