A loan is always interesting for consumers when they need money. But before you sign a contract with the bank, you should know exactly whether you can actually afford the installments. At first glance, it’s a contradiction: If you want to borrow money, you have to be financially efficient. But this is the only way to ensure that you can safely repay the installments. In this article, you will learn how you can plan the monthly credit burden and what you should pay special attention to.
Determine income and expenses
Before applying for a loan, clarify exactly what income and expenses you have each month. Keeping a household book is complex, but it can be very useful. List all regular earnings. Find out exactly what the financial burden is each month. Rent, shopping, insurance, any other credit installments and the costs for mobility and hobbies definitely belong in this list.
Items that you only pay annually, divide by 12 and add them proportionately every month. This allows you to estimate the installment amount you can pay for a loan relatively accurately. In the following graphic you can see what such a setup can look like.
In this example, a married couple generates income of 2,900 dollars. With an average monthly expenditure of 1,805 dollars, a monthly installment of 500-600 dollars can easily be paid for the loan.
If you subtract monthly expenses from your monthly income, you will receive the theoretical credit rate. Theoretically only because you should install a safety buffer. If there is around 500 dollars left every month, your credit rate should not exceed 300-400 dollars. This means that you have no difficulty in repaying even unexpected expenses.
Always in disposition?
If you slip into the overdraft facility every month or your account is even permanently in the debit, think about an installment loan. Banks and savings banks charge disproportionately high interest rates on the overdraft facility. Interest rates are significantly higher for tolerated overdrafts beyond the agreed credit line. Even with great self-discipline, it is hardly possible for consumers to pay off this debt in a reasonable time frame. It makes sense to use an installment loan to compensate for the overdraft facility and to repay the debt in a fixed time frame.
Debt restructuring creates an overview and saves money
The majority of consumers go very responsibly around. According to study, 2014, 97.5 percent of all consumersloan repaid as agreed. Nevertheless, many households want a better overview of their finances. Especially when you have different Rescheduling seems to make sense if you use or use the current account overdraft facility. This way you not only get a better overview, you also save paying high interest rates.
The first steps towards debt restructuring:
- Identify all of your commitments.
- Compare offers for loan in the appropriate amount.
- Accept the cheapest loan offer.
- Now solve all other loan and now only pay a fixed monthly rate.
Note that some banks require prepayment penalties if you repay a loan earlier than agreed. In most cases, despite this fine, you benefit from the low interest on current offers.