Tuesday, January 17, 2012

Greetings Thrifty Friends,

Your debt-to-income ratio is expressed as a percentage, where the number is the percentage of your income you apply toward paying off debt. When calculating your debt-to-income ratio you divide your minimum monthly debt payments (excluding rent or mortgage) by your complete income.

The lower the ratio the better chance you have at qualifying for loans and low interest rates.

Please scroll down to find out what percentage is good and what percentage is dangeously high.

Keep pinchin' those pennies,
Penny

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TODAY'S THRIFTY TIP:

A healthy debt ratio, or at least an average debt ratio, is about 35 percent and below. Ideally your ratio should be about 15 percent, but if you're not above 35 percent then you're in good fiscal shape. Regardless of whether or not you have a lot of money, what you do have is under control and ready to go where it needs to go.

A debt ratio between 36 and 42 percent is where you should start being concerned and figuring out a financial plan so you can start paying some of that off. If your ratio is between 43 and 49 percent start expecting significant financial difficulties in the near future.

If you can work your debt ratio down to 35 percent or lower then you'll qualify for the loans you want and the interest rates you want as long as your credit score is also in good shape.