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LOANS: HOW MUCH CAN YOU (REALLY…) BORROW ON A NET SALARY OF €1,398.70?

By Sammy Byron , on May 14, 2024 - 2 minutes to read
COMBIEN PEUT-ON (VRAIMENT_.) EMPRUNTER AVEC UN SMIC DE 1398,70 € NET

When the desire arises to take out a loan, whether to invest in property, acquire a vehicle or carry out other projects, a crucial question emerges: how much can I borrow with my current income? This question, central to many borrowers, is the starting point for our exploration of borrowing capacity, with a particular focus on the net monthly minimum wage of €1,398.70.

Fundamentals of borrowing capacity

Borrowing capacity represents the maximum amount a person can obtain from a financial institution, based on income, expenses and other financial parameters. This capacity is subject to various influences, including :

  • Monthly net salary
  • Fixed expenses such as rent or other existing loans
  • Desired repayment period
  • The interest rate applied

Understanding these factors is essential to obtaining a realistic estimate of the amount you can borrow.

Estimating borrowing capacity

The 33% rule

A first indicator often used to assess borrowing capacity is the 33% rule. This rule stipulates that monthly repayments must not exceed one-third of net income. Thus, for a salary of €1,398.70, monthly repayments should not exceed €461.57.

Importance of a down payment

A personal contribution plays a crucial role in obtaining a loan. It reduces the total amount to be borrowed and can help you obtain more advantageous loan conditions. For an income of €1,398.70, a deposit of at least 10% of the total cost of the project is recommended.

Impact of interest rates and loan term

Interest rates and loan duration are determining factors. Low rates or a longer loan term can increase the amount that can be borrowed. For example, for a 10-year loan, the maximum amount you can borrow is €58,740, €88,110 over 15 years and €117,480 over 20 years.

Consideration of fixed charges

Current fixed charges must also be taken into account, as they affect the income available to repay the loan. After deducting these charges, if disposable income is reduced to €1,000, monthly payments should not exceed €333 per month according to the 33% rule.

To find out exactly how much you can borrow on a net minimum wage of €1,398.70, we recommend using online simulators or consulting financial experts for an assessment tailored to your situation. An official government website is available here

Sammy Byron

After studying as a specialist in investigative journalism across Europe, I decided to start writing for my own community of Internet users. You can also find my most accurate studies and analyses on the latest trends in the United States. If you are interested in an analysis or a study in collaboration with our Experts, do not hesitate to use the dedicated contact form.

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