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To apply for a second credit you must have financial capacity.

So, the question arises: Can we take out another credit, like a consolidated credit, personal, works or automobile, after having contracted a housing loan, or vice versa? The answer is simple... it will always depend on the financial capacity of the household.

When applying for a loan, for it to be approved, the bank analyzes the family's income through the effort rate and the Debit Service-to-Income (DSTI).

Effort rate that covers the installments.

The first factor evaluated is the household's effort rate that applied for credit. What is the effort rate?

The effort rate is the ratio between the total income a family receives compared to the amount it pays in credit installments. Note that the income of the credit holders is taken into account.

That is, if a couple is going to take out, for example, a car loan together, and both holders receive monthly incomes of 3,500 euros, but already owe a total of 700 euros per month in loan installments, the effort rate will be calculated based on these two values. Thus showing us the amount available for a new loan and other expenses in the budget (such as groceries, transportation, education, fuel, etc).

The effort rate is calculated based on this formula: (Loan installments / Monthly income) x 100. Therefore, in the case above, the effort rate with the housing loan corresponds to 20%. Now considering that a monthly installment of a car loan would be 300 euros, the couple would have a monthly debt value of credit installments equal to 1,000 euros. Therefore, the effort rate would become 28.6%. And what does this mean?

In this case, it means that the bank would approve a second credit to this couple. This is because, according to the recommendations of the Bank of Portugal (BdP), the ideal effort rate should be up to 34%, while between 35% and 40% is high, and over 40% is very high. However, in exceptional cases, banks have approved effort rates up to 50%.

DSTI that does not exceed the limit

There is also another factor that banks take into account for credit approval, which is the Debt Service-to-Income ratio, representing the degree of financial effort of a client relative to a debt.

According to the BdP recommendation, to acquire a new credit, the monthly incomes of the applicants should not result in a DSTI exceeding 50%.

To ensure that applicants maintain 50% of their available income after paying off credit installments, banks apply a stress factor under the current interest rate. This factor used to be 3%, but the Bank of Portugal has eased this test by reducing the stress factor to 1.5%.

So, taking the example above, if with the stress test of 1.5% applied to the interest rate of the loan you want to take out, the couple ends up with a total of monthly installments equal to 1,200 euros, we must calculate the DSTI in the same way: DSTI = (Monthly installments / Monthly net income) x 100.

Therefore, the couple would have a DSTI equal to 34.3%, which is far from the 50% limit imposed by the BdP. This means that the probability of the couple being able to get a car loan approved, after the mortgage loan, is high.

These two factors that banks implement to assess the financial capacity of applicants have as their main objective to avoid situations of default, and prevent families from facing indebtedness.

However, an important note to highlight: If you want to contract a personal credit for the own capital needed for the initial process of housing credit, you no longer have that possibility, even if you have enough effort rate. Banks do not allow the simultaneous contracting of both credits.

Did the math and have a budget to move forward with the second credit? Let's do it! The Poupança no Minuto offers a free credit intermediary service, which can save you from paperwork, communication with banks, and proposal comparison. In addition to saving money, it ensures the most suitable market proposal for you in terms of cost-benefit. Simulate now your new housing credit!

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