Is there a limit of personal borrowings?

[RobinsReturn]

I would like to know if there is a standard limit to the number of (non-mortgage) loans a person can have - to a percentage of their income? My current borrowings (one car loan, two education loans total outstanding 25k) but with another third level student on the way, I will need to borrow more. We have a mortgage, (7 years remaining) and household gross income is just over 100k per annum. I know there is a rule of thumb that your mortgage repayment shouldn't exceed a percentage of your net income. Is there a similar rule for personal borrowings? Could a credit union or bank turn down you request for a loan on the basis that they feel you are over borrowed even though your credit rating might be high? We have never defaulted on a loan or missed a payment.

 

[Brendan Burgess]

You should do a Basic information required for the "Money Makeover" forum post in that forum to get some general information.

With only 7 years left on your mortgage, most of your repayments are capital. You probably should talk to the lender about rescheduling the mortgage or giving you extra money to repay your other loans which are probably far more expensive.

Brendan

 

[Monbretia]

Most lenders would have a general guideline that repayments on the total amount of any loans, not just mortgages, should not exceed 35/40% of net monthly income.

 

[cremeegg]

With an income of €100k why do you have a car loan. That makes no sense. Perhaps you need a financial reorganisation rather than a further loan.

 

[Laughahalla]

A bank or credit union can turn you down but at the moment they seem to want to offload as much money as possible to as many people as possible.
If you've already been told that you are over-borrowed then you should definitely listen to this advice.
If you are convinced you need to take on more debt then If one bank has turned you down try another. KBC and Avant (loans over 20k) seem to have the lowest personal loan rates at the moment ~6%.
Taking on more debt is rarely a good course of action. Could you cut back on some luxuries and bankroll from monthly income?

Provide some basic information as per the template and you'll get better advice.

 

[NoRegretsCoyote]

It would depend on your age and equity position, but it would sound very much like you should go interest only on your mortgage and avoid taking on unsecured borrowings at much higher interest rates.

 

[nest egg]

...I know there is a rule of thumb that your mortgage repayment shouldn't exceed a percentage of your net income...

When I lived in France, the banks had a simple formula. They divided your monthly income into three. One third was for income tax (social insurance payments were taken at source), one third was for living expenses, and one third was for debt (any combination of mortgage, personal, car loans etc).

 

[TarfHead]

With an income of €100k why do you have a car loan. That makes no sense.

Don't want to hijack the thread, but .. this statement puzzles me. Why would one not take out a car loan ?

 

[HollowKnight]

Don't want to hijack the thread, but .. this statement puzzles me. Why would one not take out a car loan ?

I think the implication is that the person should save and pay for car with savings.

 

[Laughahalla]

Don't want to hijack the thread, but .. this statement puzzles me. Why would one not take out a car loan ?

We've been conditioned to think that debt is normal and everybody has debt. I think we need to get out of this mindset.

 

[TarfHead]

OK, thanks
I guess I saw a disconnect between the household income quoted, and 'headroom' to save.