How can you know your debt capacity? There are some simple rules that you can follow.
Before starting it is important that you are clear about your budget, that is, your monthly income and all your expenses, including rent, transportation, food, clothing, outings, services and subscriptions, among others.
So you will also know how much money you have at the end of the month to pay off a loan or to save.
Having loans or credits can be a good way to achieve certain objectives that we could not access otherwise, for example, buying a car or taking that well-deserved vacation.
However, you must be careful that the loans you have do not exceed your ability to pay or it could jeopardize your financial stability.
The recommendation is that you pay a maximum of 30% of your salary for all credits, 40% if you are paying a mortgage.
That is, if you earn 10,000 pesos a month, the most you should pay in loans is 3,000 pesos.
This percentage is highly variable, since it depends on how much you spend , that is, if between rent, food, services and outings, your expenses amount to 8,000 pesos, the accounts will not come out.
You will have to make several sacrifices or put aside other expenses to be able to pay those 3,000 pesos a month.
Joan Lanzagorta , an expert in personal finance, suggests that a healthy level of indebtedness should allow you to cover the monthly payment comfortably, without limiting your other expenses and that you feel water up to your neck.
If you have already requested a loan or are thinking of doing so, there are some things you should keep in mind:
Avoid having multiple credits at the same time. This is the easiest way to exceed your debt capacity , especially if they are small loans, when you make the sum they can become unaffordable.
Read the fine print. Many times when applying for the loan or credit we do not review the conditions.
For example, at first you may pay an amount per month, but if the interest rate is variable and goes up, over time you will have to pay more. Make sure that you are going to pay the same every month for the life of the loan.
Take into account the quantity you are going to order. Make sure that the amount you are requesting is what you really need. If you ask for more, you will end up spending it on things you don’t need and will have to pay for it in the end.
Finally, remember that loans are not an extension of your income, that additional money you have today, you must pay it back with interest in the future, so it must always have a purpose.