determine your debt ratio, you need to know:
How much do you make?
vs Net income
Gross Income: Total
amount of income you bring in anually before deductions. Deductions
include things such as Taxes, 401K, Medical Insurance, all Payroll
Net Income: Income after all deductions. Also
known as "take home pay".
What are your total outstanding debts?
vs Unsecured debt.
To calculate debt ratio, we suggest you use "Net Yearly Income"
and "Total Unsecured Debt". Take your "Total Unsecured
Debt" and divide it by your "Net Yearly Income".
This will give you your truest "Debt Ratio".
Unsecured Debt: This means that there is no real
property to take back to settle any portion of the debt.
Examples: Personnel loans, Signature loans, Pay Day loans, Credit
Cards, Medical bills, Bad checks, Bills that have been "charged
off", Lines of credit, Tabs, etc.
If you have $10,000.00 of debt and make $30,000.00 a year Net income,
your "Debt Ratio" is .33 or 33% ($10,000.00 divided by
$30,000.00). If this number is larger
than .36 or 36% then you are probably in need of some kind of financial
Most banks use your Gross income to figure debt ratio.
Our suggested calculation will be slightly higher BUT you can not
spend what is taken from your pay check before you get it.
you are interested in how we can help lower your monthly payments
or just help build a monthly budget, please contact us. One of our
Counselors will be able to answer all of your questions and help
you on your way to financial freedom.