In the context of taking out one or more loans, the banks study the borrower’s debt ratio, but what is the maximum rate for debt? We will explain everything to you. In France, financial and banking institutions agree to offer loans up to a limit of 33% of the debt, that is to say, that one-third of the borrower’s income must be spent on reimbursement of ” one or more loans. In practice, we very often notice that many households have a maximum debt of 40%, a limit much higher than that authorized.
The debt ratio is important because it makes it possible to determine the room for maneuver of a household and to have a debt of 40% must remain a maximum limit because, from 50%, one does not speak anymore of debt but indeed over-indebtedness. Note that a drop in income or an increase in monthly payments linked to a variable rate of a loan may, for example, lead to an automatic increase in the debt rate. To calculate your debt ratio, go to this page.
Can we exceed 33% debt ratio?
Debt is important, but it is not the only indicator of the financial health of a household, that is to say, that it is indeed possible to exceed the debt ratio of 33% to finance a personal project, life, or even a real estate project. What is important is above all the notion of the remainder to live. The remainder to live (RAV) is quite simply the result resulting from the deduction of the monthly payments and the fixed monthly charges on the household incomes (rent, bills of water and electricity, insurances, etc.). The banks which offer credit and in particular the mortgage will study the debt ratio but also the rest to live to draw up a complete borrower profile.
It is possible to have a reasonable debt ratio but with an insufficient living balance, this is often the case in a mortgage loan or credit consolidation projects, most of the refusals are linked to an insufficient living balance. It is therefore important for a bank to carry out a financing study taking into account all these elements, this goes much further than the estimates of online simulators.
How to reduce your debt?
Many households have too much debt, or just outside the recommended limit. It is important to keep control of your finances because an increase in expenses or a decrease in income can upset the financial balance and in particular the debt-to-living ratio. To avoid these imbalances and to be able to face unforeseen expenses of life, it is advisable to resort to credit consolidation.
It is an operation precisely dedicated to the reduction of the debt ratio and the reconstitution of the remainder to live, the idea is quite simply to regroup all the credits in progress in only one contract, which makes it possible to lengthen the duration reimbursement and reduce the monthly payment. The simulation for this type of financing is completely free, it allows in particular to have an overview of the new reduced monthly payment.