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Your income to debt ratio clearly defines the amount of debt you have verses the amount of income you are bringing into your household on a monthly basis. The debt to income ratio is utilized by various lenders when you have applied for funding or any type of credit. If your debt to income ratio is on the low side, you are more likely to get credit or a loan when you apply. You will want to keep your debt to income ratio at thirty-six percent or lower; for higher debt to income ratio numbers, it is an indication that the individual may be having difficulty meeting financial obligations or that the person may encounter future difficulties in terms of debt management. Basically, higher debt to income ratio numbers suggest that the individual has less income coming in to a household verses the debts that the individual currently maintains.
Why Use a Debt to Income Ratio Calculator
To figure out what your debt to income ratio is, you have to be fully aware of all of your debts. Get your bills together and write down all of the bills you owe. You will need to include recurring debts like insurance costs, land taxes, loan principles, and interest rates. Student loans, car loans, and home mortgages also need to be included in your debt configurations. The more debts you have, the more complicated the debt to income ratio calculations will be; this is where a calculator comes in handy.
Using a debt to income ratio calculator helps you make more accurate calculations when it comes time to determine your debt to income ratio. You can gather up all of your debts, insert the data in a debt to income ratio calculator online, and you are instantly provided with a debt ratio percentage that illustrates the amount of debt you have compared to the amount of income you are bringing in. The use of a debt to income ratio calculator ensures that your calculations are more accurate and you get a clear picture of your financial situation. It also takes the time and hassle out of making complex calculations.
Even if you are not planning on applying for credit any time soon, knowing what your debt to income ratio is will help you assess where you stand financially and what your financial future looks like. Your debt to income ratio can indicate if you need to make some maneuvers to prevent future debt management related issues.
How to Calculate Debt to Income Ratio
You can learn how to calculate debt to income ratio by hand if you desire. You first have to add up all of your debts that you pay on a monthly basis; this excludes debts related to personal expenses like the amount of money you spend on food or clothing. Once you have all of your debts added up, you need to then take your gross income and divide that number into your debt calculations. This figure will result in a decimal number that has to be multiplied by 100 to figure out your debt to income ratio in a percentage. You should make these kinds of calculations once a year or more, since your amount of debt and your amount of income is always subject to change.
For faster calculations you can go online and use debt to income ratio calculators. You can input the data requested and within minutes you know exactly what percentage your debt to income ratio is; this saves you time, hassles, and any chance of miscalculating what your situation looks like. You will have to carefully input your information and recheck it for accuracy to ensure you have the right figures when calculating your debt to income ratio however; if you input inaccurate information you will wind up with a skewed percentage.
Where to Find an Income to Debt Ratio Calculator Online
You have a number of options online when searching for an income to debt ratio calculator. Some calculators are simplified and allow you to add in the total amount of recurring debt, your gross income, and the debt to income ratio is then provided. Other calculators are more complex and allow you to add up your rent or mortgage, credit card debts, auto payments, and other monthly debts along with your monthly income.
Bankrate.com®
Bankrate.com® has a simplified debt to income ratio calculator that you can use to assess the amount of debt that you have. You can add up all of your debt, insert the information, add your gross income amount and you are instantly provided with a debt to income ratio within seconds. You are responsible for assessing the total amount of debt so the calculator is only as accurate as the information you supply. Visit the site at:
http://www.bankrate.com/brm/calc/ratio-debt-calculator.asp.
CreditSoup
The website CreditSoup has a debt to income ratio calculator that is a bit more complex. You can enter in your rent or mortgage, credit card payments, auto loan payments, and your monthly income. The calculator also allows you to add up any alimony you might be receiving and you can add additional forms of income into the calculator. The site suggests that if you have a percentage that is greater than fifty percent you should seek out legal advice for debt reduction. If your ratio falls into the forty to forty-nine percent brackets, you could face potential debt problems in the future. If you have a rating that is thirty-five percent to thirty-nine percent, you will want to structure a plan for paying off your debt so that you can avoid potential debt issues. Anything under thirty-four percent indicates that your debt to income ratio is in good condition and so are you.
http://www.creditsoup.com/resources/calculators/debttoincome.asp.
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