What is the debt capacity?

The debt capacity supposes the maximum debt capacity that an individual or company is capable of assuming without having debt problems. solvency. This is the maximum amount of money that is capable of acquiring without putting your financial situation at risk when it comes to repayment. The normal thing is that the debt capacity is between 30-40%, although this varies depending on the individual and the situation.

This means that between 60 and 70% of the user's income is used to fulfill basic and habitual tasks of their day-to-day economic activity.

What is the use of knowing the debt capacity?

Measuring the debt capacity allows users to know if they can assume a new debt or not with the resources they have and will have in the future. That is, being able to meet monthly payments, for example.

However, debt capacity is a concept that can also be assessed by banks before granting or denying a loan. credit (or certain financial products) to an individual. In this way, they make sure that they will recover the total amount or amount, together with the interest that they would generate. The risk of future defaults is reduced.

Factors that affect borrowing capacity

We can highlight the following factors that affect, in one way or another, our debt capacity:

  • The economic solvency so that we can obtain income in the present and in the future to face the return of the loan and interests.
  • That we have endorsements or guarantees from third parties, as well as other alternative means of payment.
  • The patrimony and the annual income that the borrower has when verifying his capacity.

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