What income is sufficient to get a loan? Sooner or later everyone who plans to use this form of external financing will ask this question. This issue is particularly important for applicants for a mortgage, which applies to higher amounts than cash and is a long-term commitment. According to the BIK report published in 2016, over 2 million Poles repay the mortgage. The basic condition we must meet to get a loan is having sufficient creditworthiness. It is worth knowing that even small, but reliable and documented income will sooner give us a positive credit decision, rather than high, but occasionally affecting our account amounts.
However, money is not everything …
How much you have to earn to get a loan depends, among others on what loan we apply for (cash or mortgage), how much we want to borrow from the bank and how many installments (equal or decreasing) we plan to spread the liability. Before the bank decides whether it grants us a loan or “sends us away”, it will consider, among others the amount and continuity of the income we receive, the cost of living, the number of currently serviced liabilities (the fewer loans and credits we pay back when applying for a loan, the more favorable the bank will look at us), the form and continuity of employment, age, gender, borrower’s place of residence etc.
Banks analyze many different factors before making a credit decision, and it may happen that even a person who, due to the amount of income affecting their account, should easily get a loan, will receive a negative credit decision. For the bank, apart from how much we earn, it is important, among others age of the potential borrower. Theoretically, the age range is quite wide, but practically the model client applying for a mortgage is a person not older than 35 years old.
The older the future borrower, the greater the distance he is treated by the bank. What matters, however, is not the age of the debtor at the time of signing the loan agreement, but what age he will be on the day the loan is repaid. It is worth knowing that many banks stipulate that the borrower must not be older than 75-80 at the time of paying the last installment.
Recommendation S also says that the age of the borrower has an impact on his creditworthiness. We find in it that “when determining the length of the loan period for a retail customer, the bank is required to take into account the borrower’s ability to create income throughout the duration of the contract, paying particular attention to the time at which the borrower reaches retirement age. “
History (credit) matters
In addition to the answer to the question “how much you have to earn to get a loan”, it’s also worth looking at your credit history. If we have been reliable and timely payers so far, the bank will grant us a loan more willingly than those who have experienced late payment. A person with credits and loans in a bank’s point of view is a more reliable customer than someone who has never made any commitments.
Although it may seem strange, having a “blank card” in BIK will not help us. Let us add, however, that the lack of credit history is better than being on debtors’ databases. If we are in any of them, we can be sure that we will not receive the loan (the bank will almost automatically reject our application).
More than one borrower
Interestingly, in most banks, even income at the national minimum level, but received by two working people (a total of about 3,000 USD net) is sufficient to take a loan that allows you to buy a small property from the secondary market. The condition for such investment to be financed by banks is that potential borrowers pay 20% of the value of the real estate being credited. Unfortunately, a single with a minimum wage would not be so lucky.
A person earning about $ 1500 net of mortgage a month would not be granted by any bank. To make this possible, a single-person household would have to earn (depending on the bank) from 2000 to 3000 USD net. A loan received (again depending on the bank) from 60 thousand. up to 100,000 USD would not be enough to buy a studio in any of the major Polish cities.
This policy of banks should not come as a surprise, however, because one person paying back a loan is for this financial institution a much more risky customer than two (they do not have to be related persons) borrowers. In a situation where we apply for a loan ourselves, the bank may require additional collateral, higher insurance or higher than the minimum own contribution.
Form and continuity of employment
The safest form of employment from the bank’s point of view is a permanent employment contract. Unfortunately, people working on a specific work contract or mandate contract have little chance of getting a mortgage. The same applies to those who have considerable breaks in employment or often change employers. Theoretically, banks accept income from various sources (including those from civil law contracts or managerial contracts), but the employment contract is practically the highest. If the borrower conducts business activity or works on the basis of a civil law agreement, the bank may request additional security from him.
Not just earnings
As we have already mentioned, although the amount of earnings is important, the other factors are equally important. Even if the future borrower can boast a salary much higher than the minimum, the bank will look at, among others his credit history and how much expenses are charged to his wallet. In the latter case, it will take into account whether the borrower is the sole breadwinner, how many dependents he has, whether he has other outstanding obligations, how much he spends, “etc.”
The future debtor’s expenses are of great importance for the estimation of his creditworthiness, in simplified terms: the higher they are, the lower the creditworthiness will be, because a person who earns, e.g., $ 10,000 a month, and devotes 9,500 to maintaining a possible loan would have nothing to pay back .
How much do you have to earn to get a loan? Summary
Bad credit history, too much spending or badly chosen loan parameters can result in a negative credit decision despite good earnings. Therefore, before we go to the bank for a loan, we will look at our financial situation, think about the amount we want to apply for and how many installments we plan to distribute. Sometimes a good solution that will improve our creditworthiness is taking a loan in the form of equal, not decreasing installments.
If we have the option, consider taking out a loan with someone. Obviously, it should be a person who can boast of good creditworthiness. What we can do ourselves (and what the bank will do later) is also checking your credit history at BIK, paying off other obligations and giving up credit card limits. Therefore, when applying for a loan, you should not only reckon with the fact that you will have to pay it back later, but also prepare properly for the application process. The more that the bank has the right to issue a negative credit decision without informing the applicants about what was the reason.