Did you know that before approving you a loan all major financial institutions calculate your debt ratio? Do you know what yours is?
The debt ratio is based on your gross income, consequently, your debt should not be greater than 35% to 40% of gross income. Should you exceed this threshold, the financial institution will most likely refuse the loan, unless there are special circumstances. To obtain a loan, you must have a satisfactory debt ratio and a good credit rating.
By their nature, financial institutions often tend to offer you more credit than you actually require. The interest rate for a personal loan of less than $ 10,000 will be about 2% higher than if you borrow more than $ 10,000. Nevertheless, it is important to limit the loan to the amount really required. Remember that availability often creates the need. Moreover, even a small investment that earns interest is often much more appropriate than an unjustified loan that will, unfortunately, cost you dearly in interest.