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The Debt to Income Ratio is a good way for creditors to compare your income with the amount of debt you currently have. Most creditors use this tool to determine if extending credit to you will put the creditor at risk. If you have ever applied for a credit card or line of credit, you know that the amount of debt you owe plays a large role in how much credit is extended to you, as well as what type of interest rate you receive. The Debt to Income Ratio is calculated by taking your total monthly debt payments and dividing this https://americashpaydayloan.com/pawn-shops-co/ amount by your total take home pay. In some cases, some creditors may use gross pay (before taxes) instead of take home pay for this calculation.

Debt To Income Ratio Calculator: How To Calculate Your Ratio

And here’s an easy, automated way to calculate it – by using Bankrate’s debt to income ratio calculator. Check out this link or click on the image below to try it out.

Q & A About The Debt To Income Ratio

The best Debt to Income Ratio to have is 10% or less. This means that you have a minimal amount of debt and a substantial amount of income. You are in the best position to receive credit cards and other credit with lower rates and excellent terms.

If your Debt to Income Ratio is between 10%-20%, you are still a good candidate for creditors to extend credit. You may not have the very best terms with creditors, but you are still more likely to receive a lower interest rate on a credit card or line of credit than someone with a much higher debt to income ratio. (more…)