Credit: Can I get enough for my dream?

The pretty little house in the ad is a real bargain. Nevertheless, hardly anyone has enough money to buy a house completely on the high side. Then a loan could make your dream of owning your own home come true. But with your salary, do you actually get enough money from the bank to pay for it? How much can you count on and when will you be able to get out of financing? That depends on several factors.

Only then is there a loan at all

The most important thing first of all: How much you get with what income cannot be predicted across the board. This is because every bank and every credit broker calculates the maximum loan amount differently.

But before that, a completely different, much more important question arises, namely: Will you get a loan at all? Because for a loan you have to meet certain requirements – depending on your life situation:

  • the age: loans are only available from the age of 18.
  • permanent employment: no secure money – no credit. Therefore, employees in the probationary period normally do not get a loan. A fixed-term employment contract, on the other hand, is not necessarily a no-go, but the amount of credit will most likely be lower. In any case, the net income should be above the so-called seizure exemption limit of 1,139.99 euros (as of 2019). Otherwise, there are only small loans, as the bank cannot have its lent money seized by you if necessary.
  • Successful self-employment: Self-employed and freelancers often have a hard time with lenders because their income can fluctuate or even be lost. Banks and credit brokers therefore take a close look at business figures. Often three successful years have to be proven in order to get a loan.
  • Creditworthiness: If you have not paid back many loans on time in the past, your Schufa score will go down the drain. Then there is no more fresh money.

Why all these rules? Very simple: Whoever gives you a credit, of course wants to get his money back sometime. That’s why banks and other creditors want to make sure that this works. With the above criteria they try to assess whether you will pay off your debts – or maybe not.

More salary does not automatically mean more credit

Of course: The most important thing for a loan is the amount of your income. The more salary (or, in the case of the self-employed, the more profit), the greater the probability that you will be able to repay the loan. But this does not automatically mean that you will receive a higher sum with a net salary of 2,000 euros, for example, than with 1,500 euros net.

The decisive factor is how much of your net salary you have at your disposal at the end of the day. In other words: what is left over when you deduct your rent and other running costs, for example for children or car leasing contracts?

You don’t always have to state this in a loan application. Many banks and credit brokers calculate a lump sum which they deduct from your income. Experience shows that they can estimate how much money you can put into repayment each month. The more this is, the more you will be loaned. If you also own a property or other securities, there is even more money.

You should also take a close look at your expenditure yourself before you apply for a loan so that you don’t fall into the debt trap. You can read more about this in the guide “Enough money to live on despite a loan”.

Sample calculations: When is there how much?

For an indication of how much money you can count on, let’s assume that you “only” have your salary from which you can repay the loan. So you do not own a house or shares with rental income or dividends. Furthermore, in this example calculation you do not have to pay for any children. Otherwise you would have less money to repay, so you would also borrow less.

But remember: Every bank and every loan broker calculates differently and has its own criteria. With one lender there may be more, with another less, with some there may be nothing.

Credit line at 1,500 Euro net

If you earn 1,500 Euros net per month, the law only allows 256.34 Euros of this amount to be seized (you can find out how much this seizure amount is for which income in the seizure table of the debt counselling service). That means: If a lender does not get his installment, he can only collect this 256.34 Euro per month from you by court order. You may keep the rest of your income.

Let’s assume that you use this garnishment amount of 256.34 euros per month completely to repay the loan. You would then repay 3,076.08 euros per year (12 months x 256.34 euros = 3,076.08 euros). What does this mean for your credit line? Well: You not only have to pay back the amount you borrowed – but also the interest. These vary depending on the term of the loan. If you want to repay the money in five years, banks charged an average of 4.53 percent interest in January 2019. For a term of more than five years, the interest rate was already 6.72 percent (the average interest rates can be found in these interest rate statistics of the Deutsche Bundesbank).

Now we will add up: (Annual repayment + interest) x term gives the possible credit line. According to this, in our example there would be around 8,600 euros (with a three-year term), 13,000 euros (with a five-year term) or even around 29,000 euros (15-year term).

You can calculate the loan amount, interest rate, installment, etc. on this website, for example. Again, the values are only rough guidelines.