How much money can I borrow?Uncategorized
How much money can you borrow and how does the lender arrive at such an amount. A good question to ask yourself when you are about to apply for a loan. In this article we explain how the lender calculates how much money you can borrow. How much money you can borrow for a car or a house. And what about maximum borrowing.
This way the lender calculates how much money you can borrow
For calculating your maximum loan amount, most lenders will use the same standards. These standards have been drawn up by the Dutch Association of Finance Companies (VFN). The purpose of these standards is to check whether you can continue to pay the monthly charges in the future. In this way they want to prevent people like you and me from getting into debt.
It is calculated what you can still pay in installments after deduction of the most important cost items. They calculate this on the basis of a basic standard and a borrowing standard. We explain how that works exactly.
Step 1: What is the basic standard
The basic standard is the minimum amount that a household should have as income. If your net income appears to be lower than the basic standard for your household, then no loan may be granted to you for protection.
Step 2: Calculate the basic standard
This basic standard is determined by the VFN and the Dutch Banking Association. Every year the Nugud advises them with new figures. On the basis of the current figures, a new formula is drawn up for calculating the basic standard.
Step 3: What is the loan standard
The lending norm depends on the standard of living of a family. The moment the income becomes higher, more will be spent. This determined fact is included in the loan standard.
Step 4: Calculate the loan standard
To calculate the borrowing norm, the personal basic norm is taken + 15% of the net income. The amount that comes out of this should be left over for the monthly expenses you have as a family. In this way it is possible to calculate which space is left for the monthly repayment of a loan.
How much money can you borrow for a house
Have you seen a nice house for sale and do you want to calculate your maximum mortgage? Then you can easily have a calculation performed on the site of the bank or lender. After you have entered your details you will quickly get an idea of your maximum mortgage.
With a maximum mortgage calculation, the following things are taken into account:
- Your (joint) income. This is also referred to as ‘test income’.
- The mortgage interest that you pay or the fixed test interest.
- Other financial obligations you have such as loans, alimony etc.
- The part of your income that you can spend on your mortgage.
And where do you pay attention when you want to finance your own house? The amount that you can borrow to finance your existing home depends on your gross annual income and the costs of the existing home. Future plans and any financial obligations also play a role in this.
How much money can you borrow for a car
How much you can borrow for a car loan is different for everyone. The lender will check if you already have another loan. The more loans you have, the lower the amount to purchase the car will be. The loan form also determines the amount of your loan. You can choose from a personal loan or a revolving credit. Which loan suits you best depends on your personal situation.
Tips when you borrow money to finance your car:
- Do not let the duration exceed the duration of use
It is important to note that the term of the loan will not be longer than the useful life of the car. Or in other words: make sure that you are not still paying off your loan when you are no longer driving the car.
- Don’t just buy on installment
You will see a lot of advertisements that make it attractive to buy a brand new car on installment. This sounds fairly affordable, but on closer inspection it is very expensive. In some cases you pay the maximum interest of 14%. While you could also have financed the car from a personal loan with an interest rate of 3.9%.
- Choose an attractive interest rate
The interest rates differ per bank. That’s why it’s so important to request multiple quotes from different banks. Compare these with each other and discover where you can borrow at the cheapest interest rate.
When you apply for a loan, you will take into account what you can borrow maximum. The lender will look at your financial situation at that time. On the basis of your income, family composition, employment and financial obligations, the maximum amount you can borrow is calculated.
This is laid down in the Financial Supervision Act (Wtf) and in the lenders’ codes of conduct. Purely to protect you against a loan that you cannot pay off. The Netherlands Authority for the Financial Markets (AFM) is responsible for conduct supervision.
Maximum borrowing is not always wise. The more you borrow, the more you have to pay back. And the higher the amount of interest that you have to pay back. Our advice is: borrow what you really need. You can pay attention to the monthly payments and the repayment period. Can you miss the amount every month? And do you expect that you can miss this amount for the entire repayment period?
Types of loans
How much money you can borrow depends on the type of loan you choose. And with every situation there is another type of loan that fits best. We list all types of loans for you.
A mini loan is the easiest loan to apply for. You borrow a relatively small amount up to € 1500 for a short time. It can be requested urgently and you can expect it on your account the same day. The mini loan is also interesting because no BKR check is done when you request it. If you have a negative BKR registration in your name, you can still request a mini loan. You can also apply for this loan without a permanent contract and without a payslip.
The personal loan is a stable form of loan. You know exactly where you stand with a personal loan in advance. You take out this loan with a fixed term, a fixed interest rate, and a fixed monthly term. In this way the personal loan offers security and you will not be faced with any surprises. With a personal loan you get the full amount paid into your account in one go. It is therefore not possible to make a new withdrawal from the credit later.
A revolving credit is a flexible form of borrowing. This is intended to offer extra financial room for a longer period that is not fixed. The nice thing about this loan form is that you decide when you withdraw which amount. You only pay interest on the amount that you actually borrowed. If you opt for a revolving credit, you are dealing with a variable interest rate.
With a business loan you can borrow money to invest in your company. You actually use the money that you borrow on a business basis within your company. You determine the term of the business loan yourself, together with the lender. This is tailored to your needs and the investment objective.