What is food credit
Household lump sums and cost of living: This is how the banks calculate
If you want to take out a loan, your creditworthiness or creditworthiness will first be checked. Ultimately, of course, the bank would like to know whether you can reliably repay the installments. When applying for a loan, you must therefore provide information about your income and your employment relationship in the self-assessment. A sufficiently high income and a permanent employment relationship are factors that ensure a good credit rating.
Your expenses are also important. Because if your income is almost entirely consumed by your living expenses, the chances are low that you will be able to raise enough money for the loan installments in the long term.
The bank therefore carries out an income-expenditure calculation, the result of which decides whether you will be granted a loan or not. There are only a few ways of obtaining the loan if the result is insufficient.
The banks use a flat-rate household fee for the calculation because many borrowers cannot state their costs exactly or they estimate them too low and are later overwhelmed by the loan installments. The flat rates are set individually by each bank and can therefore differ.
Difference: flat-rate household and living expenses
The household lump sum is used by banks to determine the financial possibilities of an applicant if the applicant cannot provide precise information on income and expenditure. These calculations are made according to the individual standards of the respective credit institution.
For example, different aspects can be included in the calculation of the flat rate. While one credit institute includes the car costs in the flat rate, another lender does without it. The household flat rate is based on an estimate of your expenses, which is offset against your actual income.
When the Federal Statistical Office determines the cost of living in the form of a consumer price index every five years, it always applies the same criteria. The following section explains in more detail how to calculate the cost of living.
Household flat rate vs. cost of living via the CPI
|Household flat rate||Consumer price index|
Classification of the cost of living by the Federal Statistical Office
The Federal Statistical Office determines the average cost of living every five years in the form of the consumer price index (CPI) for Germany. This index shows the change in prices for goods and services that are used for private needs.
To determine the (VPI), the Federal Statistical Office compiles a so-called “basket of goods” from over 750 goods, which are distributed over the following areas. The goods correspond to the goods that Germans buy most of the time. The prices for these products are continuously collected for the consumer price index.
Usually there are more than 300,000 samples.
- CC01 Food and Soft Drinks
- CC02 Alcoholic beverages, tobacco products
- CC03 Clothing and Footwear
- CC04 Apartment rent, water, electricity, gas
- CC05 Home furnishings
- CC06 Health Care
- CC07 traffic
- CC08 messaging
- CC09 Leisure, entertainment and culture
- CC10 Education
- CC11 Accommodation and restaurant services
- CC12 other goods and services
Each of these areas is provided with its own code. The price determination can then be assigned to different household types, which are segmented according to size and income.
These costs can generally be counted towards the cost of living
This includes the costs that every household has to regularly incur in order to live in everyday life. These costs can be found in the basket of the Federal Statistical Office.
- Catering: This includes food, beverages and tobacco products
- living costs: This item includes the monthly rent, but also accommodation costs in hotels or other accommodations.
- dress: All items of clothing required are taken into account here.
- Education and training: If there are tuition fees or library fees, they count towards the cost of living.
- pleasure: Entrance fees to cinemas, concerts or money spent on the fair are part of these costs.
- Sports: Spending on leisure time also includes membership fees in sports clubs or fitness studios.
- to travel: Money for vacations is also part of the cost of living.
- Locomotion: All expenses for cars, monthly public transport tickets or flight tickets are counted as cost of living.
- Hygiene and personal hygiene: From deodorant to shower gel to perfume or toilet paper, drugstore items count towards the cost of living.
- livestock farming: All costs related to a pet are included in the cost of living.
Insurance not taken into account
Insurance such as health insurance are not included in the basket of the Federal Statistical Office.
Cost of living in Germany
A base year is always used as a comparison for the CPI. The year 2010 is currently the base year for the CPI 2015. The cost of living for 2016 is not determined by the Federal Statistical Office. The next point in time for setting the CPI is 2020.
The consumer price index replaced the cost of living index in 2000.
|year||CPI||Increase per year|
Reasons for the rising cost of living
The cost of living in Germany has risen continuously since 1991. There are many reasons for this increase. For example, the phase out of nuclear power has made energy significantly more expensive. The cost of living also adjusts to the increased wages.
Apartment prices are an important item. In some cities such as Berlin or Munich, rental costs have risen enormously in recent years - a trend that is reflected in the increased cost of living.
Average cost of living in Germany
According to data from the Federal Statistical Office, the average private consumer spending per household in Germany in 2016 was 2,480 euros per month. The residential area had the highest share with 877 euros (corresponds to around 35%). Consumer spending on food, beverages and tobacco products was 342 euros per month.
An evaluation of various surveys gives the following picture of the cost of living in Germany:
|Double earner||3,539 - 4,709 euros||960 euros||662 euros||507 euros||471 euros|
|Young couple||2,641 - 3,529 euros||677 euros||600 euros||450 euros||434 euros|
|single parent||1,148 - 1,410 euros||574 euros||178 euros||268 euros||178 euros|
|pensioner||up to 1,023 euros||450 euros||341 euros||189 euros||n / a|
Data source: Handelsblatt
Cost of living nationwide
According to a survey in Dresden, consumers in Germany spend the least amount on their livelihood at 1,394 euros per month. The highest cost of living is in Munich. There they are at 2,045 euros. On a nationwide average, the cost of living is just under 1,600 euros per month.
How the household flat rate works
In order to first determine whether you can afford the planned loan installments, the bank carries out an income-expenditure calculation. Your expenses are deducted from your income and a check is made to see whether the difference is sufficient to pay the installments.
If a two-person household has living costs totaling 1,500 euros and the net household income is 2,500 euros, theoretically 1,000 euros are available for the monthly installment.
What is the bank's income?
In the household accounting, all regular income of the household is taken into account as income, i.e. primarily the salary - or in the case of several earners, the sum of the monthly salary receipts. The net salary is used in each case because only this is actually available for use.
In addition, child benefit and pensions are taken into account, as well as regular income that you generate, for example, through rental income. However, child benefit can also be waived if it is foreseeable that it will only be paid for a short period of time because the children will no longer be entitled to it afterwards. This can be the case because they reach the age of majority or the training is terminated.
You must provide evidence for all of the above-mentioned income, for example pay slips and notices of child benefit or pension. However, limited benefits such as parental allowance are not taken into account, as the loan usually runs for a longer period of time than it is granted.
Components of the flat rate
In order to calculate the household flat rate that applies to you, the bank usually only needs the number of people living in your household. The banks and savings banks have a table for the household flat rate in which the values for the various household sizes are listed. The flat rate includes expenses for food, clothing, insurance, telephone charges, radio fees and the like.
As a rule, the rent is not part of the flat-rate household fee, but is stated separately in the self-disclosure. In the case of real estate loans, it often does not apply either, since the borrowers then live in their own home. The costs for a car are usually charged additionally because this is not available in every household.
However, since each credit institution sets the household flat rate itself, it can happen that at one bank, for example, the car costs are included in the household flat rate and at another are not included but are requested separately. In any case, the flat rate is only part of the monthly expenses. Accordingly, the expenses of two households of the same size can differ significantly if the rents are different and there are higher additional costs in the one household.
Amount of the household lump sum
Since the cost of living differs regionally, the values for the household flat rate are also different at the credit institutions. For a single household, values between 600 and 800 euros are usual, for each additional person living in the household usually 200 euros are added. For a family of four, at least 1,200 euros in living expenses are required.
It does not matter whether the people are children, adolescents or adults. The full value is charged even for infants, as these grow within the term of the loan and so do the financial expenses for them.
Different cost of living
Even if your actual cost of living is lower than the household flat rate set by the bank or savings bank, the value cannot be changed. As a rule, the banks cannot enter a different value because the household flat rate is already preset in the calculation.
If, on the other hand, your monthly costs are higher, state them in the self-assessment. This can be the case, for example, if you have a second car in your household or if you are obliged to make maintenance payments.
Household flat rates and their role in approving a loan
The desired rate must be lower than the remaining income after deducting the household allowance and other expenses. There is no universal percentage that income should increase the loan rate. However, every credit institution will welcome the largest possible difference because the risk of default is then particularly low.
However, the sufficient budget surplus is not the only decisive factor for the approval of the loan. The credit check also includes, for example, the SCHUFA information. Credit agencies such as SCHUFA can give banks an overview of how you behaved in previous financial transactions. If there have been more defaults in the past, even with sufficient income, the likelihood of getting the loan will decrease.
Submit loan inquiries to different institutions
Since the amount of the household lump sum for credit differs between banks, you may be able to obtain a loan from one bank after being rejected by another with the same income values. This is at least true if you just barely meet the requirements. It is therefore worthwhile to submit a loan application to several institutes.
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What to do if the loan is declined
If your income is not enough to cover the flat-rate household allowance plus your other costs and also to pay the loan installments, you will hardly be able to get the loan approved. After all, in this case the bank has to assume that you will not be able to pay off the loan. Under certain circumstances, however, you can convince the bank with additional collateral such as life insurance or a surety.
You can of course also apply for a loan again if the financial circumstances of your household have changed, for example due to a salary increase or a new job for your spouse. The income may then be sufficient to pay the household lump sum plus other costs and still have enough money available for the monthly loan installments.
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