One of the many reason why so many Americans file for bankruptcy is because of high debt. This country overall has one of the highest debt to income ratios.
Before any loan is approved, your DTI is calculated. This calculation is ran because if your DTI is too high, you run in the risk of not being able to pay your creditors each month and therefore you will be prevented from adding any other debt to your report; a person with a high DTI is a high risk consumer.
How do you calculate the DTI?
You want to first calculate what your monthly income is; this could be a variety of things ranging from your monthly wages to alimony and child support.
Example:
The next thing to be calculated is the debt you have incurred. Debt does not include any utility bills, but it will include credit card balances, mortgage, child support, business loans, personal loans, the car payment, etc. Do not include it if it will be paid off within three months.
Lastly, take the monthly expenses and divide it by the income and you will be coming up with your DTI.
For example:
Monthly Income = $4500
Your Monthly Income = $4000
Fixed Monthly Expenses = $2,300
DTI = 49%
This debt to income ratio is very poor and shows that expenses are so high that it would be very difficult to gain any additional credit or financing.
The first step of debt reduction is always taking a look at where you currently stand, and that is through obtaining your debt to income ratio. - 31379
Before any loan is approved, your DTI is calculated. This calculation is ran because if your DTI is too high, you run in the risk of not being able to pay your creditors each month and therefore you will be prevented from adding any other debt to your report; a person with a high DTI is a high risk consumer.
How do you calculate the DTI?
You want to first calculate what your monthly income is; this could be a variety of things ranging from your monthly wages to alimony and child support.
Example:
The next thing to be calculated is the debt you have incurred. Debt does not include any utility bills, but it will include credit card balances, mortgage, child support, business loans, personal loans, the car payment, etc. Do not include it if it will be paid off within three months.
Lastly, take the monthly expenses and divide it by the income and you will be coming up with your DTI.
For example:
Monthly Income = $4500
Your Monthly Income = $4000
Fixed Monthly Expenses = $2,300
DTI = 49%
This debt to income ratio is very poor and shows that expenses are so high that it would be very difficult to gain any additional credit or financing.
The first step of debt reduction is always taking a look at where you currently stand, and that is through obtaining your debt to income ratio. - 31379
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