The demand for consumer credit and https://telegram-store.com/catalog/product-category/channels/economics grows every year. In the last year, the situation has become more complicated, as some people have chosen to invest their money in things: household appliances, cars or real estate.

Because of such a large influx of people, banks are simply not willing to take on all the responsibility, so each potential customer is checked on a few important points.

However, there are other options for the bank to secure itself. For example – to offer a higher rate. In order to avoid this and to get approved for the loan at all, the borrower must know the debt load indicator.

What is a leverage ratio?

Debt Load Ratio (DTR) is the ratio of the amount of monthly loan payments (existing loans + the one the family or person is going to take out) to the family’s current income. This kind of indicator is very important for the bank, because it shows the amount of net income of the family or person that will remain after the loans are paid. It is clear that the less available money, the more difficult it will be to make payments, which means – in unforeseen situations, the bank may stop receiving a payment from a particular client at all.

With a high debt load, it is very difficult to get a loan at a good rate from a good bank, so you need to “unload” it.

IPA calculation

It may seem that only some banks have this type of settlement. But in fact, every customer is subjected to such a bill and more – each person is assigned a certain category. There are 5 in total:

  • standard. The risk level is 0%;
  • non-standard. From 1% to 20%;
  • doubtful. From 21% to 50%;
  • problematic. 51% to 99%;
  • hopeless. 100% risk.

In addition to this “portfolio”, the bank also takes into account past credit experience, where debts, speed of closing and overall responsibility in repayment of the loan.

Full credit value

From the debt load, the bank also determines the approximate time when the debt will be repaid. From this data, you can also find out the APR. To do this, a formula is taken:

– The total cost of the loan is divided by the number of months the loan is for, and then by the total amount of income.

In this case, the bank can immediately see how to “help” the client close the debt. Let’s say the most common option is to make the rate higher, but also stretch it out over more months.

When can you not count on it?

As you can understand, this is a rather long and painstaking process that the bank will not do in some cases:

  • military mortgages;
  • loan restructuring (when the bank increases the term of the loan, reducing the amount of payment);
  • educational loans with state support.

These are “preferential” options, which will already depend on the client’s specific credit history.

Other parameters that affect the debt load indicator

The most important one is the family income. In turn, it depends on many factors:

First – it is the region, as the geography will depend on wages and the cost of living. For example, in the case of Moscow and Murmansk, these figures may differ in 2 times, and with the same income family from the first city will belong to the “hopeless”, and in the second already to the “non-standard” or even “standard”.

Also, income will be affected by pensions, benefits, interest on deposits, or dividend payouts.

How do you confirm all of your income?

No one at the bank will take your word for it, so to confirm your words to the office will need to provide certificates of the following types:

  • 2-NDFL certificates;
  • certificate of income received by the NPD payer;
  • book of income and expenditures of the entrepreneur;
  • personal income tax, lease contracts;
  • statements of the current bank account.