Why the budget is important when taking out a loan.

Why a budget ? Prudent management and the avoidance of things that are not available in the household budget are the basis for a healthy financial situation. This responsible behavior is worth striving for and can be learned. The most important tools for the correct handling of income and expenditure are a budget and a budget book.

Only those who know exactly how much money they can expect each month and what costs they will have to cover can really keep their financial situation under control. This also applies when it comes to making a necessary purchase or investment using a loan. In such cases, the main thing is to have a firm understanding of how much credit you can afford. The creation of a budget and the keeping of a budget book are also the foundation for a loan-financed project.

The basic elements of the budget

The basic elements of the budget

On the revenue side, a budget contains all incoming payments that can be expected in the month. This includes salaries, wages, maintenance payments, child benefits, pensions and other items. On the other hand, all expenses are recorded as they occur during the month. Rent, groceries, cars and reserves make up the bulk of this expenditure. Many small amounts for the various necessary purchases and purchases must also be considered when planning.

Experience has shown that many small amounts quickly add up to an unexpected amount. The budget therefore lists all items, even very low items, in terms of both income and expenditure. Finally, all sums are added up. The difference between the income and the expenditure shows whether the money is sufficient for the monthly needs at all, or whether in the best case scenario there is even something left at the end of the month.

The budget helps to take out a loan

The budget helps to take out a loan

But even if, despite all the good business practices, the situation arises that a purchase must be made on the basis of an installment loan, the household book is a real help. Because a precise analysis of your own financial situation is the be-all and end-all of every credit check and thus essential for a bank’s credit decision. The conscientious and therefore honest keeping of a household book provides the necessary basis in the event that a loan is required.

This monthly overview provides a realistic assessment of the financial scope for repaying a possible loan. Basically, the following applies: The loan terms (amount of the loan, term, interest, monthly installment) depend on your own monthly financial capacity.

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