There are often stories that the bank refuses to lend or offers to borrow less than expected, and people are confused – why? Normunds Dūcis, Swedbank’s Head of Mortgage Lending in Latvia, explains the criteria for assessing borrowing opportunities.
Income stability
In order to assess the ability of the population to take on any credit obligations, the bank primarily assesses income – whether it is regular, official and stable. In addition to salary, other regular income that you can prove, such as benefits, rental income, income from economic or other activities, is assessed. The period over which a borrower’s income is measured is usually six months, but in some cases where, for example, income is volatile, the income may be assessed over a longer period.
“The most common reasons why the borrower’s wishes do not match the opportunities are the shadow economy and envelope wages. In such a situation, the borrower himself feels that his household budget is perfectly sufficient to make a long-term commitment, but in reality what the borrower sees in his wallet is significantly different from what the bank sees in his accounts. The bank’s ability to repay a loan can be objectively assessed only on the basis of a reasonable and documentable income. Official taxable income is also a guarantee of security for the borrower in situations where work is temporarily lost. With the paid benefit, it will be possible both to continue to cover daily expenses and to pay the monthly loan payment, ”emphasizes Normunds Dūcis.
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