How much can I borrow?

Loan amount

How much you can borrow depends on the type of loan, the lender and, above all, your financial situation. Each lender has its own minimum and maximum amounts: for example, unsecured consumer loans are most often issued for amounts from a few hundred to 15,000–25,000 euros, while mortgages are issued for much larger sums. The exact limits are shown on each lender’s card in the catalogue.

But the maximum amount on the card is not necessarily what you will be approved for. The lender assesses your income, essential expenses, existing debts and credit history, and decides on that basis how much it can lend you. With a poor credit history or a modest income, the approved amount is usually well below the maximum.

How to work out what you can afford

Before applying, it is important to understand what monthly payment you can make without straining your budget. To do this, draw up a simple table:

• Income: your salary after tax and any other regular income.
• Fixed expenses: rent or mortgage, utilities, phone, subscriptions, payments on existing loans.
• Variable expenses: food, transport and fuel, household goods, medicines.

The difference between your income and all your expenses is your spare budget. The payment on a new loan should fit within it, with room left for unexpected costs.

Many lenders also look at the share of payments in your income: usually all payments on all your loans combined should not exceed roughly 30–40% of your net monthly income. The threshold varies from lender to lender.

Example. Your net income is 1,500 EUR a month. 40% of that is 600 EUR. If you already pay 150 EUR on another loan, no more than 450 EUR a month is left for a new one. But if your table shows only 300 EUR left after all expenses, go with the lower figure: the percentage rule is an upper limit, not a recommendation. You can work out what loan amount such a payment corresponds to at different terms and rates with the loan calculator.

Before applying for a loan

Before applying, take a sober look at your ability to repay and think through the amount and term. Too long a term lowers the monthly payment but increases the total cost of the loan. Too short a term with a high payment can lead to financial difficulty. Look for a balance: the payment should be comfortable, and the term no longer than necessary.

Be honest with yourself: do you really need the purchase you are borrowing for, and is your income stable enough to keep paying until the end of the term? Don’t use a loan for gambling or impulsive spending. Once you have weighed everything up, choose a lender in the catalogue for your country: Credits in Latvia, Credits in Europe — North & West or Credits in Europe — South & East.