A loan may not be granted despite an impeccable credit history and stable income. The reason for refusal may be a high credit load. How to calculate this load, and what indicator will be considered high, you can learn in this article.

Credit load: what is it?

Your credit or debt load is the sum of all the loan payments you make per month. There is a distinction between your actual load (how much you are paying now) and your potential load (how much you will pay).

The credit load takes into account the repayments on credits, loans, credit cards and instalments you have entered into. Your obligations as a guarantor or co-borrower are also taken into account. Credit card limits you don’t use are also included in the calculation of potential charge-offs: this money is at your disposal, so the obligation to repay it may arise at any time.

How to calculate your credit load

The monthly financial burden of credit obligations is divided by the official income for the month and multiplied by 100%. This is how the annual interest rate – the debt load – is obtained.

If the income is not fixed, the average value for the last 6 or 12 months is calculated.

If you pay in instalments every fortnight, two payments must be taken into account when calculating the value.

If it is credit card debt, imagine that you have spent your entire credit card limit and calculate the minimum payment required.

How do you know if your credit load is high or not?

In general, difficulty in getting a loan occurs when your credit load exceeds 50 percent of your monthly income. However, the bank may take into account other financial obligations of the client, usually not related to the credit load, such as alimony payments.

How to apply for a loan with a high credit load

If a bank denies you a loan because of a high credit load, there is only one way to fix it: reduce the load.

How to reduce your credit load

Request refinancing

If you are being squeezed by a heavy credit burden, you can refinance your loans. You may be offered a lower monthly payment or interest rate.

Close credit cards

Open cards with high limits are ruining your stats. By closing them, you eliminate the potential burden. If you do need a credit card, you can contact the bank and reduce the limit to the level you need.

Involve a co-borrower

If the loan is with a co-borrower, not only your income will be taken into account in the evaluation, but also their income. You will share the burden, so your chances of approval will increase.

Increase your income

You may not have reported all your income on your application, but only the ‘white’ part of your salary, so the loan burden seems too high. The bank will also take into account the ‘grey’ part of your salary if you provide an unofficial certificate from your employer. Don’t worry, this information is confidential.

Where to get a loan if your credit load is still high

If the bank refuses you a loan, you can try to get a microloan. Microfinance organisations, unlike banks, are more loyal to borrowers’ financial problems. You may be told that your debt load exceeds 50%, but this fact is usually not a reason for refusal.