When applying for a home or apartment loan for private purposes, you may not have any arrears in paying contributions or taxes. The bank will also check that you have no enforcement activities and whether you pay your employees on time. It will also verify how you have been dealing with repayment of loans and borrowings so far, as well as what financial liabilities – private and business – you currently have. Be aware that any cash loan, overdraft or credit card limit will reduce your credit standing. The scale of the reduction depends on the type of financial product as well as the chosen form of business taxation. Some liabilities can be settled in accounting, which avoids their negative impact on creditworthiness.
Installment cash loan
A traditional cash loan requires paying monthly installments, so it is a constant burden for your home or business budget. If it was entered into a company and you settle on general terms, then the bank will treat only the capital part of the installments as an expense – you can include the interest part as tax deductible. In this respect, the disadvantages of other forms of taxation are again apparent. Well, in the case of a tax card and a lump sum, the full installments are taken into account, which significantly reduces creditworthiness.
Current account limit and credit card
Banks also treat credit cards and account overdrafts as a monthly financial burden. Such products usually reduce the calculated income by an amount equivalent to 2-5% of the limit granted. On the other hand, there are institutions that do not take such obligations into account at all.
If you settle your business with a lump sum or tax card, the bank will count the full amount of the leasing installments as your monthly liability. Meanwhile, in the case of taxation on general terms, it is so that operating leasing installments can be settled as the cost of doing business; in this situation, the use of leasing does not affect creditworthiness at all.
In the case of an entrepreneur settling a company on the basis of the revenue and expense ledger, he may depreciate the interest part of the leasing installment in costs, so only the capital part will reduce his income. The subject of the lease may be amortized in costs.
Some corporate loans, due to amortization of only the interest cost of the loan, will always decrease the entrepreneur’s creditworthiness.