Why should debt capacity be taken into account?

Why should debt capacity be taken into account?

Why should debt capacity be taken into account?



 Loan capacity is the limit amount that a person can borrow without affecting their financial security. This is the result of subtracting net income (salary or other income), fixed costs (which you pay each month without default, such as services or credit debt) and variable costs (eventually presented), multiplied by 35 or 40%. This way, mathematically, the formula would look like this:


Debt Capacity = (Monthly Income – Fixed and Variable Expense) x 0.35 or 0.40


35 or 40 represents the maximum percentage of debt that we can allocate in relation to income, to pay off the monthly loan. For this reason, it is important to calculate monthly income and expenses to fully meet financial obligations.


This type of calculation allows us to have a clear picture of the possibility of obtaining credit with certainty to cover the obligation.


How to increase loan capacity?

  • Cancel your debts within the stipulated period, thus avoiding interest increases and unfavorable valuations in your credit history.
  • Explore more sources of income to access better credit.
  • Manage an expense budget based on your income.
  • Avoid exceeding the 40% loan limit
  • If you pay off the loan and get extra money, take it and pay off your debt.
In addition, it is important to identify several types of debt that you can assume are compatible with your ability to pay:

  • Consumer debt: this is taken when you obtain a product or service through a credit card or by installment payment.
  • Ant debts: they correspond to small debts we assume from loans with close people or barely significant expenses, which by themselves do not represent maintenance debt, but together they can be problematic.
  • Leveraged debt: this debt consists of formal credit that you can get to invest in a project, such as a business or company, that generates profitability, facilitating early repayment of debt.
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