Calculation of remainder to live
When an individual wishes to make a major purchase, such as the purchase of a car, and he does not have the necessary contribution, he will then apply for a loan from a bank. He will repay part of it every month.
When applying for credit, the banker will have to analyze the applicant's situation. Thus, he will study his professional situation (nature of the employment contract ...), his financial situation (account keeping, amount of the personal contribution, indebtedness ...) and finally his family situation (number of people in the household, single-parent family, couple, single ...).
From these different situations, the banker will deduce two factors that will allow him to accept or not a credit file. These will be the debt ratio, which is a universal calculation, and the remainder to be lived, which is specific to banks.
Before making a loan, it is therefore essential to analyze your situation upstream so as not to contract too much credit which could lead to a situation of over-indebtedness.
The rest to live
The remainder to live, says RAV in the jargon, is the amount that remains in a household after the fixed charges have been deducted. It is done by a simple subtraction:
Remainder to live = Income - Fixed charges
- property income
- allowances can be taken into account depending on the bank.
Fixed charges include:
- rents (tenant) or mortgage (owner)
- other loans related to the acquisition of real estate
- consumer loans
- home and / or car insurance
- the mutual
- pensions paid
- taxes (housing tax, property tax)
- loan repayment
- the costs generated by the property or the rental (electricity, water, heating, etc.).
These are irreducible expenses.
This remainder to live is essential because it is the money necessary for the survival of a person for the month, once his expenses have been paid. It varies according to the person, the composition of the household and the place of residence. For example, a person living in Paris will have a higher standard of living than a person living in the countryside. The remainder to live will therefore have to be more important if he wishes to contract.
Please note, some resources are limited in time. This is the case, for example, with family allowances. If a household plans to take out a mortgage, it is prudent not to take into account the allowances received. Indeed, the credit is repayable over 15 to 30 years, but the allowances will not be received over the entire duration. Conversely, if a household has a few loans to repay (such as a car loan), it will have to argue with the bank that the rest to live will be more important soon, once the loan has been repaid. .
The calculation of the remainder to live
The calculation of the remainder to live seems relatively simple on the surface. However, it will vary, as we have seen, depending on the situation of the household (composition, place of residence, salary) but also and above all of the bank.
There is no rule governing this calculation. Therefore, each bank will establish its own criteria.
For example, a bank may take into account in its calculations the income of the Family Allowance Fund (CAF) while another bank will not. Likewise, a lending institution may impose its minimum amount of remainder to be lived for a single person. Some banks will impose an outstanding amount of US $ 1,300 for a single person while other banks will settle for US $ 800.
Some notions remain all the same: it is accepted that the minimum remainder to live for a single person is 700 US dollars. For a person in a relationship, the amount is generally said to be 800 US dollars or 400 US dollars per person. The amounts are increased by 300 US dollars per dependent.
Remains to live and family daily life
The family quotient is calculated as follows:
Remainder to live / number of people x 12 months.
Banks estimate that if the family quotient is below 4,500 US dollars, there is a risk for the household of debt distress. Conversely, if it exceeds 8,500 US dollars, the household can justify a debt ratio greater than 33%, the maximum rate set by the banks.
If a borrowing rate is too high, the rest to live becomes low which inevitably leads to a situation of over-indebtedness.
The rest to live and over-indebtedness
Initially, the calculation of the remainder to be lived serves above all not to put a household in a situation of over-indebtedness. Despite this, as situations may change within the household (divorce, birth, etc.), households sometimes find themselves facing a difficult financial situation.
The remainder to be lived is a fundamental factor for the Commission of over-indebtedness so that it can study a file of over-indebtedness deposited by a debtor in difficult financial situation. The commission uses a minimum living allowance. From there, she decides whether or not to put in place a recovery plan and to help the indebted person find a solution to repay their debts. Among these solutions, the commission proposes the assignment of salary.
In order to pay the creditors, the interested party can allow the boss to pay the creditors directly with part of the salary. The employee does not see his money which is used to repay his debts. This mechanism can be voluntary or forced (by the over-indebtedness commission or by court order).
However, part of the salary cannot be garnished, this is called the elusive quota.
The latter is calculated according to the remainder to be lived. The remainder to be lived must then be at least equal to the Active Solidarity Income (RSA), increased in the case of dependents. Similarly, 80% of the allowances received by a household are elusive. The elusive quota ultimately corresponds to the remainder to be lived.
In order to improve his remainder to live, the interested party can carry out a repurchase of credit allowing him to lower his monthly payments and therefore to increase his remainder to live.
The repurchase of credits to increase his remainder to live
The repurchase of credit makes it possible to group together the various credits in progress by the household to form only one relating to a longer repayment period. It will thus allow the household to reduce its monthly payments and allow to recover a reasonable remainder to live by spreading its debts over a longer period.
However, this method should only be done if the household really needs more money each month, because the more it spreads the debts over time, the more interest it will pay.
The debt ratio
After the remainder to live, the second criterion studied by the bank during a credit file is the debt ratio. The latter is linked to the remainder to be lived. It corresponds to the ratio between a household's monthly payments and their net taxable income.
The income taken into account is
- net wages
- family allowances
- the rents collected
- income from financial investments (if they are regular)
- retirement or disability pensions
- non-salaried professional income (agricultural, industrial or commercial profits and liberal professions).
The charges include:
- current loans (car loan for example)
- pensions and annuities paid
- rents still to be paid
- the estimated monthly payments of the requested credit
Thus, we calculate the total expenses that we compare to the total income.
For example: Mr. and Mrs. X have income of 30,000 US dollars per year and expenses of 8,000 US dollars, their debt ratio is then 25% (8,000 x 100 / 32,000).
The maximum debt ratio accepted by banks is 33%, or one third of the borrower's net income. Beyond that, banks generally do not lend, believing that there is a risk both for the household - risk of over-indebtedness - and for the banks - risk of not receiving repayments.
However, there are exceptions. This is particularly the case for households with high incomes. The family quotient being larger, it is possible for loan organizations to grant them a higher debt ratio, as long as the remainder to live remains reasonable within the household.
Thus, the debt ratio and the rest to live are linked and must be studied together before contracting a loan. We note the importance of carrying out these operations upstream so as not to put yourself in a difficult financial situation leading to over-indebtedness. Likewise, as the amount of the remainder to live varies according to the credit organizations, it will be interesting to compare them in order to find the one that will offer the most suitable credit for the household situation.