What is the debt ratio?
The debt ratio is a key indicator in the world of finance for banking establishments. Expressed as a percentage, it makes it possible to measure the share of the monthly income of an individual or a company devoted to the repayment of real estate loans, consumer loans or car loans. It thus reflects the ability of an individual or a company to meet its financial commitments without getting into difficulty.
What impact does the debt ratio have on borrowing capacity?
Know the percentage of your debt ratio before taking out a loan
The debt ratio and borrowing capacity are two related concepts:
- The debt ratio refers to the fixed ratio expressed as a percentage representing debts in relation to income.
- Borrowing capacity corresponds to the maximum amount that a bank can lend without exceeding this ratio.
Evaluate your borrowing capacity for a real estate loan, consumer credit, car…
The lower the debt ratio, the more the bank considers that the borrower remains solvent. Conversely, if the rate approaches or exceeds 35%, borrowing capacity decreases, which can lead to a loan refusal for a real estate purchase, for example. The debt ratio therefore makes it possible to assess the borrowing capacity of an individual or a company requesting a bank loan.
How is the debt ratio calculated?
Resources taken into account in the calculation of the debt ratio
In the calculation of the debt ratio, are included:
- Regular net income: salaries, fixed bonuses (13 months), pensions, retirement income (generally retained at 70% out of prudence), self-employed profits depending on their stability.
- Some establishments also accept recurring housing or family allowances.
The charges taken into account correspond to all monthly payments of all current credits (real estate, consumption, automobile), possible rents or even alimony paid. Conversely, current expenses linked to energy, food or transport are not taken into account here: they are part of the remainder of life.
Calculation formula
The formula for calculating the debt ratio is simple:
Debt rate (%) = (total monthly payments + fixed charges) ÷ (total net income) × 100
Calculation example
If you repay 800 euros per month on a net income of 2,500 euros, your debt ratio is 32% (800 ÷ 2,500 × 100 = 32%).
Simulation to estimate your debt ratio
To anticipate a financing project, it is wise to use an online debt rate simulator. The government provides a free debt calculator to quickly obtain an estimate of your rate based on your income and monthly expenses. Some other online simulators even offer a simulation of borrowing capacity based on the calculated debt ratio.
What maximum debt rate?
Maximum debt rate: definition
In 2025, the maximum debt rate accepted by banks is 35% including borrower insurance. This 35% rule is widely applied in the banking sector, however, it does not constitute a legal obligation. However, certain borrower profiles will be able to benefit from financing beyond this threshold, particularly if they have a comfortable remainder of their life or stable and high income.
The rest to live
The “remainder to live on” corresponds to the amount of money a household has left after paying all of its credit charges. It serves as a complementary criterion to the debt ratio. Even if the latter is less than 35%, too little remaining time can compromise the granting of financing. Conversely, a household with a rate of 37%, but a high remaining amount, can be considered solvent. Banks therefore take into account both the debt ratio and the remaining life to assess the overall financial situation.
How much can I borrow based on my debt ratio?
To know the amount that it is possible to borrow, you must first calculate the maximum monthly payment that it is possible to pay within the debt limit. This monthly payment will depend on the debt rate used, the duration of the loan and the monthly net income. For example, a household earning 4,000 euros net per month and having no other credits could theoretically devote up to 1,400 euros to their monthly payments (i.e. 35%). Loan simulators allow you to refine this data.
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