Debt To Income Ratio. Debt Consolidation can help you Save Today!!!

Debt To Income Ratio

A debt to income ratio is the simplest method that a creditor or lender may use to compare the amount of your take home income with the amount of your overall debt, excluding your mortgage or rent payment. This will tell the creditor or lender what percentage of your take home income is being used to pay for non mortgage related debt.

There are 3 parts to calculate your debt to income ratio.

1. Take Home Income: This is the amount your paycheck reflects after all your deductions. Take home pay can come from your job wages, sales commissions, company bonuses, alimony, child support, tips, interest on money, company dividends, social security, pensions and other government assistance. Below are 4 methods that can help you calculate your take home pay. - If you are paid weekly then you must multiply your weekly take home income by 52 then divide by 12. - If you are paid every other week then you must multiply your take home pay by 26 then divide by 12. - If you are consistently paid the same amount monthly then simply use that amount. -If you are paid a salary plus commissions that fluctuate up and down each month, the best way to calculate your monthly take home is to add up your take home salary with commissions over the last 12 months then divide by 12
2. Monthly Debt Payments: This is the amount you owe to your creditors each month, excluding mortgage,rent, utilities, and taxes. Monthly debt payments including - Credit card payments, Student loan payments, Auto or other vehicle loan payments, Bank or credit union loan payments, Medical or dental bills payments, COmputer or electric items loans payments, Furniture or appliance items loans payments.
3. Debt to Income Ratio Formula: Take your calculated total (monthly debt payment) and divide it by your calculated total (take home income) and this will give you your debt to income ratio percentage.

Below is an example

1. Monthly Take home pay - $2,000
2. Monthly debt payments are - $700
3. Take $700 divide by $2,000 = 35%

35% is your debt to income ratio.

Debt to income ratio above 35% you would be considered a high credit risk. Your chances of obtaining credit will be slim to none. At this ratio or higher creditors will consider that your take home income is not enough to support your current debt payments and monthly bills.

If you find yourself in this situation then debt consolidation may be for you. Fill out one of our applications and one of our credit counseling experts will contact you shortly.

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