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 you can get a loan approved, your debt to income ratio must be calculated. If you DTI is too high, you are a risky borrower and may possibly have issues paying your creditors back.
Getting a loan approved involves having the lender calculate your debt to income ratio to show how much risk you are as a consumer. If you DTI is higher than the norm, this shows the company that you are high risk and may run into the problem of not being able to pay the creditors back in time.
How is the DTI determined?
Your monthly income is the first thing that needs to be determined to start this equation. Your monthly income can include child support, alimony, benefits, annuities, and your monthly wages; this will include all income that comes into the household on a monthly basis. If your income is different on a monthly basis then the lender will calculate the last six months of standard and averaged income.
Debt is the next part of the equation. Debt does not include your utility bills but it will encompass outstanding balances on credit cards, loans, mortgage, child support, car payments, etc. If a debt will be paid off within three months, then do not include it.
DTI = 20%
Example:
Monthly Income = $4500
Your Monthly Income = $4000
Fixed Monthly Expenses = $2,300
DTI = 62%
This is way to high for a finance company to consider loaning out any money. If you do receive credit or financing it is at a very high cost.
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. - 31380
Before you can get a loan approved, your debt to income ratio must be calculated. If you DTI is too high, you are a risky borrower and may possibly have issues paying your creditors back.
Getting a loan approved involves having the lender calculate your debt to income ratio to show how much risk you are as a consumer. If you DTI is higher than the norm, this shows the company that you are high risk and may run into the problem of not being able to pay the creditors back in time.
How is the DTI determined?
Your monthly income is the first thing that needs to be determined to start this equation. Your monthly income can include child support, alimony, benefits, annuities, and your monthly wages; this will include all income that comes into the household on a monthly basis. If your income is different on a monthly basis then the lender will calculate the last six months of standard and averaged income.
Debt is the next part of the equation. Debt does not include your utility bills but it will encompass outstanding balances on credit cards, loans, mortgage, child support, car payments, etc. If a debt will be paid off within three months, then do not include it.
DTI = 20%
Example:
Monthly Income = $4500
Your Monthly Income = $4000
Fixed Monthly Expenses = $2,300
DTI = 62%
This is way to high for a finance company to consider loaning out any money. If you do receive credit or financing it is at a very high cost.
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. - 31380
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Learn more about Smart Debt Repair. Stop by Lisa Max's site where you can find out all about debt consolidation scams and various debt repair tips.
