How do your financial obligations affect future financing opportunities

Some people are surprised when they find that the approved financing amount is lower than expected. In most cases, the reason is not the salary itself, but the existing financial obligations that reduce the remaining income and affect the financing amount available to you, the repayment term, and the speed of approval.

What Are Current Financial Obligations?

Financial obligations are all ongoing monthly payments that a person is committed to at a specific time. They usually include:

• Existing personal loan installments
• Credit cards and their used limits
• Car financing installments or any other financing
• Financial guarantees provided on behalf of others

These obligations are used as a key indicator to assess the actual financial position, not income alone.

How Do Obligations Affect the Financing Decision?

The financing provider does not look at your salary only, but also at what remains after your current obligations. If the obligations are high, this may lead to:

• Reducing the available financing amount
• Increasing the repayment term
• Rejection in some cases

However, if the obligations are low, the chances of obtaining a higher financing amount become greater. This brings us to an important term: the “Debt Burden Ratio”.

Debt Burden Ratio and Its Role in Assessment

Financing providers rely on what is known as the Debt Burden Ratio (DBR), which reflects total monthly obligations compared to income.

If monthly obligations exceed this indicative ratio -around 33% for employees and 25% for retirees), this may affect the chances of obtaining new financing.

How Can You Improve Your Chances of Getting Financing?

Before applying for any new personal financing, review your financial position through these steps:

• Calculate your monthly obligations and make sure they are suitable for your income.
• Settle some existing financing obligations early, if possible.
• Close any completed or small obligation before applying.

Accordingly, the key takeaway can be summarized as follows:

“Managing your financial obligations today is a direct investment in the financing opportunities you may need tomorrow.”