Debt/income ratio
Calculate Your Debt-to-Income Ratio
Comparing your earnings against your spending , also known as a
debt-to-income ratio, is one of the most popular approaches for evaluating if you have too much debt. Lenders, for years, have looked at debt-to-income ratios to get a better grasp on a person's current financial picture to determine credit-worthiness.
Use this calculator to calculate your debt-to-income ratio.
Now that you have calculated your debt-to-income ratio, understanding what it means to you is the next step.
- 36% or less: This is an ideal debt load to carry for most people. Showing that you can control your spending in relation to your income is what lenders are looking for when evaluating if you are credit-worthy.
- 37% to 42%: Your debts still may seem manageable, but start paying them down before they begin to spiral out of control. At this level, credit cards still may be easy to obtain, but acquiring loans may be more difficult.
- 43% to 49%: Your debt ratio is high and financial difficulties may be looming unless you take immediate action.
- 50% or more: Seek professional help to make plans for drastically reducing your debt before it becomes a real problem.
If you're concerned about your credit management, ask someone at your credit union for guidance or for referral to a credit counseling agency.
Published January 1, 2003
Printed Saturday, October 11, 2008
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