Of course, the bank would like to know if you can repay the installments. When applying for credit, you must therefore provide information about your earnings and your employment in the self-assessment. A sufficiently high income and a permanent employment are factors that ensure a good credit rating.
But also important are your expenses. Because when your income is almost completely spent on your living expenses, chances are low that you will be able to raise enough money for your loan installments in the long term.
So the bank carries out a revenue-expenditure account, the result of which determines whether you are granted a loan or not. There are only a few ways to still get the loan if the result is insufficient.
The banks use a flat rate for the calculation because many borrowers can not state their costs accurately or they estimate too low and are later overwhelmed by the credit installments. The lump sums are set individually by each bank and can therefore differ.
Difference: Household allowance and cost of living
The household lump sum is used by banks to determine the financial capacity of an applicant if he / she can not give precise details of income and expenditure. These calculations are made according to individual benchmarks of the respective credit institution.
For the calculation of the lump sum, for example, various aspects can be included. While a bank calculates the car costs into the lump sum, another lender waives it. The household allowance is therefore based on an estimate of your expenditure, which is offset against your actual income.
If 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 deals in more detail with the calculation of the cost of living.
Household package vs. Cost of living above the CPI
|household allowance||Consumer Price Index|
Division of the cost of living of the Federal Statistical Office
The Federal Statistical Office determines the average cost of living at intervals of five years in the form of the consumer price index (CPI) for Germany. This index indicates the change in prices of goods and services used for private needs.
To determine the (CPI), the Federal Statistical Office compiles a so-called “shopping basket” of more than 750 items, which are distributed to the following areas. The goods correspond to the goods that are bought by Germans the most. For the consumer price index, the prices of these products are continuously charged.