Question 1

What is the effort rate?

Accepted Answer

The effort rate is the percentage of your net monthly income that is committed to paying charges and loan installments. In practice, it shows the share of your income used by your current obligations. It is one of the main indicators banks use to assess the risk of a loan. The lower your effort rate, the more balanced your budget is and the higher the likelihood that a credit application will be approved.

Question 2

What do the colors mean?

Accepted Answer

Green, below 35%: healthy situation.
Yellow, from 35% to less than 45%: concerning, because it is close to the maximum that Banco de Portugal recommends to banks for a new loan.
Red, from 45% to less than 55%: critical, makes a new loan harder.
Dark red, from 55% upwards: the budget cannot bear this weight.

Question 3

How can I lower my effort rate?

Accepted Answer

Move your Mortgage to better conditions, consolidate Personal Credit into a single monthly payment or repay part of a loan early. Increasing the household’s income also lowers the rate.

Question 4

How is the effort rate calculated?

Accepted Answer

The calculation is simple: you add up your monthly charges and the rent or mortgage payment you make, divide that total by your net monthly income, and multiply by 100 to get the percentage.
Effort rate = (total loan installments ÷ net monthly income) × 100.
For example, if you have a monthly income of 2500 €, rent of 500 €, and other charges of 300 €, your effort rate is (500 + 300) ÷ 2500 × 100, that is, 32%.
Important note on income: consider regular, recurring net income. Variable or non-recurring components — such as per diems, irregular bonuses, commissions, overtime, or benefits in kind — may be treated differently by the bank and affect the effort rate actually considered.
Our simulator performs this calculation automatically based on the values you enter and immediately shows you the percentage and the corresponding effort level.

Question 5

What effort rate values are considered healthy?

Accepted Answer

In general, an effort rate below 35% is considered healthy and indicates a balanced household budget.
From 35% to less than 45% the rate is concerning and calls for closer attention to the budget.
From 45% to less than 55% the rate is critical: the risk of payment difficulties is significant and the approval of new credit becomes unlikely.
From 55% upwards the rate is unbearable: the budget cannot sustain this burden.
These levels are indicative only. The real capacity of each household also depends on income, fixed expenses and the existence of savings or other guarantees.

Question 6

What is the maximum effort rate for a Mortgage?

Accepted Answer

In a macroprudential recommendation, Banco de Portugal advises banks not to grant credit that results in a DSTI (debt service, calculated with the stressed rate) above 45% of income.
This value applies to loans assessed from August 1, 2026; before that it was 50%.
Each bank may exceed this limit in a small share of the loans it grants, provided it justifies it.
The effort rate levels in this simulator (healthy, concerning, critical, and unbearable) are CrediSegur reference values and do not depend on this limit.

Question 7

Does all the income I receive count for the effort rate?

Accepted Answer

Not always in the same way.
The simulator calculates the effort rate based on the net income you enter, but the amount the bank uses in its assessment may differ from the total you receive.
Banks favor income that is regular, stable, and provable. Variable or non-recurring components — such as per diems, irregular bonuses, commissions, overtime, or benefits in kind — are often treated differently: they may be only partially considered, averaged over several months or years, or excluded when they are not permanent.
This means two people with the same total income can have different borrowing capacities, depending on the nature and stability of that income.
For a more realistic view, focus mainly on fixed, recurring income and, if in doubt, ask a CrediSegur manager how banks usually treat each component.

Question 8

Why should I include all my charges in the calculation?

Accepted Answer

Because the effort rate looks at all your credit commitments together, not just one.
When a bank assesses a Mortgage application, it adds the new home payment to all the other loans you already have, such as auto loans, Personal Credit, or credit cards.
So, for the simulation to reflect your real situation, it’s important to include all relevant monthly charges.
An effort rate that looks comfortable when you consider just one loan can turn out to be high once you add up all your financial responsibilities.

Question 9

What makes my effort rate change?

Accepted Answer

The effort rate depends on three factors: net income, monthly charges, and the amount of any future payment.
Increasing income makes the effort rate go down.
Increasing charges or the payment amount makes it go up.
For a Mortgage, the loan amount and the term have a direct impact on the monthly payment: a larger loan or a shorter term usually means a higher payment.
That’s why two households with the same income can have very different effort rates.

Question 10

Does a high effort rate always stop me from getting credit?

Accepted Answer

Not necessarily, but it makes it harder.
An effort rate above the recommended limit signals a higher risk of default to the bank, so most applications in that situation tend to be declined.
Even so, financial institutions have some leeway to approve a small percentage of contracts above the limit, usually when there are high incomes, financial assets or other relevant guarantees.
There are also ways to improve your effort rate before applying for credit, such as consolidating existing credit, reducing monthly payments, increasing the down payment or choosing a longer repayment term.

Question 11

Are the simulator values final?

Accepted Answer

No.
The simulator provides an estimate based solely on the figures you enter, to give you an indication of your effort rate and your financial situation.
When analyzing a credit application, banks may take into account additional factors, such as a stressed interest rate, a possible reduction in income after retirement or internal assessment criteria.
The simulation is only a financial planning tool and does not constitute a credit decision.
If you wish, a CrediSegur manager can review the figures with you and explain what banks usually ask for; the decision is always up to the bank.

Question 12

What is the household’s average monthly net income?

Accepted Answer

Average monthly net income is the average amount the household has available each month to meet its expenses, after taxes and mandatory contributions.
This indicator is used to assess the household’s financial capacity and is one of the elements considered when evaluating credit applications.

Question 13

How is average monthly net income calculated?

Accepted Answer

The calculation is done by adding up all the household’s recurring annual net income and dividing that amount by 12 months.
Formula:
Average Monthly Net Income = Total Annual Net Income ÷ 12.

Question 14

Why divide by 12 months if some people receive 14 salaries?

Accepted Answer

Because the goal is to determine an average monthly amount available over the year.
Employees usually receive 14 annual payments (12 salaries, vacation bonus and Christmas bonus). To correctly reflect average monthly income, that annual amount must be divided by 12 months.
Example:
Net monthly salary: 1500 €
Annual total: 1500 € × 14 = 21 000 €
Average monthly net income: 21 000 € ÷ 12 = 1750 €.
If the bonuses are paid in twelfths, just consider the net monthly amount received.

Question 15

How do you calculate the income of an employee?

Accepted Answer

You consider the annual net salary, including vacation and Christmas bonuses.
Formula:
(Net monthly salary × 14) ÷ 12
Example:
Net monthly salary: 1800 €
Average monthly net income: (1800 € × 14) ÷ 12 = 2100 €.

Question 16

How do you calculate the income of a self‑employed worker (recibos verdes)?

Accepted Answer

At the pre-analysis stage, the income to indicate is what you are left with after Social Security and IRS. If you don’t know it, calculate it in the “recibos verdes” simulator: for 60 000 € in billing in a profession under art. 151, you are left with around 3300 € per month.

Question 17

How do you calculate the income of someone who owns a café, restaurant or other business?

Accepted Answer

In these cases, turnover should not be used as income, since a large part corresponds to operating costs.
At the pre-analysis stage, the income to indicate is what the business leaves you per month after operating costs, Social Security and IRS — the amount shown on your IRS return, divided by 12.

Question 18

How do you calculate the income of a business owner or managing partner?

Accepted Answer

You should consider the income that actually goes into the household, namely the monthly remuneration and the regular distribution of profits, where applicable.
The company’s turnover is not the household’s income.

Question 19

How do you calculate the income of a pensioner?

Accepted Answer

You consider the annual net amount of the pension, including any bonuses, divided by 12 months.

Question 20

How do you calculate income from rent?

Accepted Answer

You consider the annual net income obtained from rents received, divided by 12 months.

Question 21

Should other income be taken into account?

Accepted Answer

Yes.
All recurring income that regularly contributes to the household budget should be included, as long as it can be documented.

Question 22

What income should not be taken into account?

Accepted Answer

Occasional or extraordinary income should not be considered, such as the sale of property, sale of cars, inheritances, one‑off compensation, occasional bonuses, withdrawals of savings or other non‑recurring receipts.

Question 23

How do you calculate income when there are several types of income in the household?

Accepted Answer

You should add up all the annual net income of each member of the household and divide the total by 12 months.
Example:
Member A: Net salary of 1700 €/month → 1700 € × 14 = 23 800 €
Member B: Self‑employed with annual turnover of 48 000 € → income considered of 36 000 €
Rents: 6000 €/year
Annual total: 65 800 €
Average monthly net income: 65 800 € ÷ 12 = 5483,33 €.

Question 24

Why is it important to use average monthly income?

Accepted Answer

Because it allows you to correctly assess the household’s financial capacity, eliminating distortions caused by the payment of vacation and Christmas bonuses, the seasonality of some activities, months with higher or lower turnover and extraordinary income.
This gives a more realistic view of the household’s economic capacity.

Question 25

Does this methodology replace document analysis?

Accepted Answer

No.
This methodology is intended only for financial pre‑analysis and allows you to quickly estimate the household’s average monthly net income.
The final assessment will always depend on the documentation required by the financial institution, such as tax returns, tax assessments, pay slips, financial statements or other documents that confirm the income actually received.

Portugal Effort Rate Simulator

Three questions to see if your budget can handle it

Make your money work harder

How we calculate

We add up the payments

We divide by income

We give it a colour

Myths

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Frequently asked questions