What is DTI?-3763

When making financial decisions, borrowing can sometimes be a necessity and sometimes an opportunity for growth.

Loans can be an important tool for buying a home, starting a business, covering education expenses, or financing everyday needs. However, when borrowing is not balanced with income and repayment capacity, the risk of over-indebtedness arises.

That is why modern banking focuses not only on lending but also on promoting a culture of responsible borrowing.

WHAT IS OVER-INDEBTEDNESS?

Over-indebtedness is a financial burden that occurs when a person or business takes on credit obligations exceeding their income capacity.

Simply put, if a significant portion of monthly income goes toward loan payments and this threatens financial stability, the risk of over-indebtedness arises.

In international practice, this risk is often assessed through income-to-debt ratios, where exceeding certain thresholds signals increased risk.

HOW DOES OVER-INDEBTEDNESS OCCUR?

Common causes include:

• Borrowing beyond income capacity
• Multiple simultaneous loans
• Taking new loans to repay existing ones
• Poor financial planning
• Income reduction or unforeseen circumstances

WHY IS IT RISKY?

Over-indebtedness is not just a high monthly burden—it is a broader financial risk. It can:

• Disrupt payment discipline
• Negatively impact credit history
• Limit future financing opportunities
• Reduce financial stability
• Lead to long-term financial stress

THE PHILOSOPHY BEHIND LOAN LIMITS

Customers may sometimes wonder why they are not offered higher loan amounts.
The goal is not limitation, but protection of financial stability.

Core principle:

Not the “maximum possible loan,” but the “loan that can be comfortably repaid.”

THIS APPROACH IS BASED ON:

• Protecting customers from over-indebtedness
• Borrowing aligned with repayment capacity
• Long-term financial health
• Responsible banking principles

Indicators such as the BGN ratio, debt burden metrics, credit history, and other risk indicators play a key role.

HOW TO PREVENT OVER-INDEBTEDNESS

Analyze your budget before borrowing
Evaluate the share of loan payments in your income
Minimize parallel obligations
Build an emergency fund
Think long-term when making credit decisions