The monthly payment of a car insurance affects the credit
Whether it's their own four walls, the new car or a long-awaited vacation: people take out loans for a wide variety of reasons. Unfortunately, it happens again and again that they take over the monthly burden and thus get into financial bottlenecks. Whether it is a construction, consumer or commercial loan: You must therefore always keep an eye on your monthly burden. But what is actually behind this term?
What does "burden" mean?
The load describes all monthly expenses that a household has to deal with. This includes, on the one hand, monthly total loan installments through a loan agreement, and on the other hand, all other monthly household expenses, for example for food, the car or hobbies.
The aim is to determine how much budget the household has available per month to pay off a loan.
The burden is the key variable from the borrower's point of view when planning a loan agreement. The additional credit charge may not exceed the available budget.
As a rule, the banks will therefore help you in advance to calculate the monthly charge based on existing benchmarks and then decide whether to grant a loan.
With this, the banks want to protect not only you as a borrower, but also yourself as a lender against default payments or even private or business insolvency.
Burden: A common term in finance
A monthly charge is a more commonly used term in finance. So it is an important nominal size:
- With the bookkeeping
- In real estate law
- When lending
Charge in the bookkeeping
In the bookkeeping, the debit describes the entry of a posting item on the debit side of the account, so this is financially "debited". It stands in opposition to the “credit” as a term.
Protection through "encumbrance" in property law
In property law, the “encumbrance” of a property in the land register serves as a security for the property owner. This gives him a right to claim, which he can assert by selling or auctioning his property if the debtor fails to meet his payment obligations. So there is a foreclosure auction.
Monthly debit for loan and repayment
In the case of lending, the monthly charge means the amount of all the monthly expenses of the borrower. These include, for example:
- Rental expenses
- Insurance costs
- Alimony payments
- Installment payments for the car
- Food and clothing estimates
- And much more.
The specification of the load must be as realistic as possible in order to be able to calculate the possible monthly credit load. The burden is then compared to the household income or the income of the borrower. In this way, the maximum credit limit can ultimately be determined based on the possible monthly installments.
Carefully calculate credit charges
It is far from easy for a layperson to get an overview of the monthly credit load. You can usually easily calculate your household expenses as a monthly charge and thus get an overview of your financial surplus.
But if you want to calculate the possible loan rate, you have to take into account numerous different factors, which are hidden behind the following technical terms.
Important terms of the credit burden
|Annuity||The annuity refers to your annual repayment to be made to the lender. It consists of the repayment portion and the interest payment.|
|Total loan amount||In contrast to the loan amount, the total loan amount includes the total sum of all costs that the borrower has to repay during the term. In addition to the nominal loan amount, interest, processing costs and commissions are also taken into account here.|
|Effective interest rate||In contrast to the so-called nominal interest rate, the effective annual interest rate contains not only the monthly repayment rate and the interest rate, but also the so-called "price-determining additional credit costs". He should therefore be consulted for the credit comparison. But be careful: appraisal fees or commitment interest are not included in the annual percentage rate.|
|Equity||Equity describes those financial resources that you can bring into the loan agreement yourself. The more equity you have, the higher the credit limit.|
|Credit limit||The maximum loan amount that the credit institution will grant you.|
|running time||The term determines in how many years you have to repay the entire loan to the lender. All interest and ancillary costs are already included here. In principle, a shorter term means a higher rate load and vice versa.|
|Nominal loan amount||Indicates the amount of your loan taken out. However, the ancillary loan costs are not included in the nominal loan amount.|
|Remaining debt||The remaining debt denotes your loan debt that is still to be repaid. You can see this on the basis of your repayment plan. Since it is reduced accordingly every month if you pay monthly, you will also receive an annual statement from the bank. This contains an overview of your remaining debt, the repayments and interest paid.|
|Payment protection insurance||It is a special form of life insurance, which is taken out at the same time as the loan agreement and analogously to the loan amount. It is often required by the bank as additional credit protection.|
|Special repayment||With a special repayment, you pay a further installment to the actual repayment, thus shortening the repayment period. However, this is only possible if it has been agreed as an option in the loan agreement.|
|Fixed interest rate||The period in which your interest rate agreed in the loan agreement remains valid. This can be between five and 30 years. How long you should commit depends on the current interest rate level. A long term can also mean a high level of planning security, but it is not always the cheapest option.|
|Borrowing rate||The annual or monthly interest rate to be paid by the borrower without incidental borrowing costs.|
|Repayment rate||The repayment that a borrower has to make each year. The repayment rate is indicated accordingly as a percentage of the nominal loan amount.|
Don't just pay attention to interest rates and repayment installments
In order to calculate the monthly charge, you therefore not only have to take into account the interest rates and repayment installments, but also numerous other factors such as ancillary loan costs, arrangement fee, commissions, etc.
How can you calculate the monthly charge?
In order to calculate your credit limit, i.e. your possible additional credit charge per month, you first have to calculate your general monthly charge. To do this, all of your household expenses are subtracted from all of your household income.
You divide the annual costs, for example for electricity and gas, by twelve and thus receive the pro rata costs apportioned to the month. In principle, it is a simple profit and loss account:
Monthly Income - Monthly Expenses = Monthly Surplus (Profit)
Example of calculating your monthly charge
|Monthly income||Monthly expenses|
|Net salary||2,300 euros||Electricity and heating||250 euro|
|Rental income||350 Euro||Ancillary housing costs||60 euro|
|Maintenance reserve||100 euros|
|Car (petrol, insurance)||250 euro|
|Insurance and installments||170 euros|
|Telephone and internet||40 euros|
|Electronics, repairs||50 Euros|
|Other expenses||100 euros|
|total||2,650 euros||total||1,470 euros|
According to the formula already mentioned: monthly income - monthly expenses = monthly surplus (profit).
2,650 - 1,470 = 1,180 euros monthly surplus
Use calculation tools
Our monthly load capacity calculator is available for easier calculation. Simply enter your monthly income and expenses in the ready-made form and you will receive the result of your possible financial resilience through a loan.
How is the credit charge calculated?
Since the credit burden is made up of the numerous different factors mentioned, there is no general formula by which you can calculate it. Rather, it is a complex puzzle made up of numerous different individual formulas. Instead, use a loan calculator and fill in your details. This takes over the complex calculation for you.
Then let the relevant bank advise you again and work out the best loan agreement for you together with your bank.
The credit comparison on financescout24.de is an offer from FFG FINANZCHECK Finanzportale GmbH (hereinafter referred to as FINANZCHECK).
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Important influencing factors
After you know your monthly surplus, i.e. your potential possible credit burden, you can determine the following influencing factors for your loan:
- The equity share
- The loan amount
- The repayment term
- The repayment rate
- The interest rate
- The fixed interest rate
Define available equity
Before you actively look for a loan, you should now determine another important influencing factor: your equity ratio. In the case of construction or real estate financing, this should be at least a third; in the case of consumer or car loans, it is often lower
In general, the more equity you can raise, the cheaper your financing or the higher your credit line.
Credit limit as the maximum loan amount
The respective credit institute gives you the credit limit. So it is a sum with a calculable risk. After all, the bank wants to make a profit in the end. Depending on how the bank rates your creditworthiness, it grants you a higher or lower loan amount. If you need a higher credit limit, you need to increase your credit score. The better your credit rating and equity ratio, the more money you can borrow from the bank
As a rule, however, you already know in advance how much money you will need for your project. The credit limit can therefore be viewed as a fixed value when calculating the monthly credit charge, for example 245,000 euros for your construction project.
State the purpose of use when researching
In fact, with many banks it makes a difference what you want to use the loan you have given. For example, they offer a real estate loan cheaper than a consumer loan or have special offers for car financing.
You must therefore always know the purpose of the loan when calculating your credit charge.
Play through different models in the online loan calculator
You now have four important fixed parameters for making an online loan comparison:
- Your possible monthly credit charge
- Your equity share
- Your loan amount
- The purpose of the loan
You can now compare different offers directly online and then seek advice from the respective bank. Your monthly credit charge also consists of:
- The repayment rate
- The interest rate
- The fixed interest rate
- The contract period
These, however, influence each other and can be put together individually and according to your own monthly load.
Change the influencing factors
Take an online loan comparison at hand and alternately change the various influencing factors as a kind of adjusting screw.
In this way, you can directly observe the respective effects of the change and slowly approach the loan agreement that is right for you.
Example of calculating a loan
Let's take the example of the monthly debit again: According to this, you have 1,180 euros a month at your disposal, which you could debit with a loan. If you want to finance a new building in Berlin-Mitte with it, the invoice could look like this:
|Loan amount||350,000 euros|
|Additional purchase costs||10,000 euros|
|Fixed interest rate||ten years|
|Debit interest||1.43 percent|
|Monthly Rate||1,100 euros|
With this calculation base, you could pay off your project with a monthly loan of 1,100 euros over exactly 21 years, with a fixed interest rate of ten years. Your remaining debt after the fixed interest rate has expired is then EUR 136,664.35.
If the interest then rises to two percent or more, the rate would already be above your possible monthly charge. So you can see how important an exact calculation of the monthly and credit charges are for your project in order not to get into financial difficulties.
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