In order to avoid finding yourself in an insolvency situation, it is important to evaluate its credit capacity. Financial institutions proceed this way before granting a loan. To obtain your the indebtedness ratio, you must add the monthly expenses from contractual engagements (mortgage, car, loan, credit margin etc.), divide it by the gross income and then multiply the result by 100.

The percentage obtained must not exceed 35 to 40% of gross income, failing which, the bank, fault of particular explanation, will most likely refuse new additional credit.

In these circumstances, any credit card not used should be cancelled, in order not to be disadvantaged in your indebtedness ratio.

Finally, it is not because a financial institution agrees to lend you money that you must accept the loan. Better to have some savings that earns interest than a loan which costs you interest.

Calculate your debt service ratio

SEE OUR OTHER PAGES ON FINANCIAL HEALTH:

• Precursory signs
• Evaluation of your financial health
• Are you too indebted?
• Practical advice
• On-line budget
• Balance sheet
• Debt service ratio
• Calculate your credit rating