Do You Have Too Much Debt?
Tuesday November 27, 2007
Just how much debt is too much? Well, it depends. Unfortunately, there isn't a number I can give you that will let you know that you have too much debt. The good news is, I can tell you how to figure it out.
Whether you have too much debt depends on the amount of debt and income you have. The simplest way is to add up the amount of money you spend on debt each month and divide it by your total monthly income. If you multiply that number by 100 you'll come up with a percentage. This percentage is your debt-to-income ratio.
You can use your debt-to-income ratio to tell whether or not you have too much debt. Essentially, the lower the ratio, the better. If you only used bad debt to calculate your ratio, it should 10% or less. If you use all your debt, you should be at 36% or less.
More Reading:
Do I Have Too Much Debt? | What's My Debt-To-Income Ratio | Good Debt vs. Bad Debt
Whether you have too much debt depends on the amount of debt and income you have. The simplest way is to add up the amount of money you spend on debt each month and divide it by your total monthly income. If you multiply that number by 100 you'll come up with a percentage. This percentage is your debt-to-income ratio.
You can use your debt-to-income ratio to tell whether or not you have too much debt. Essentially, the lower the ratio, the better. If you only used bad debt to calculate your ratio, it should 10% or less. If you use all your debt, you should be at 36% or less.
More Reading:
Do I Have Too Much Debt? | What's My Debt-To-Income Ratio | Good Debt vs. Bad Debt
Comments
any debt is too much. Debt is just bad.
Debt when used for the correct purposes of buying assets that are appreciating in value can give you the opportunity to increase your wealth considerably so to say that all debt is bad is simply bad advice.
In the UK a Bankruptcy is no longer the first choice for people with debts over £15,000. The UK Government brought in a new method to help people clear their debts called an IVA. An Individual Voluntary Arrangement can help an applicant clear up to 75% of their debts over a 5 year period. Although not as extreme as Bankruptcy an IVA will still leave the applicant with a very bad credit record for many years.
Sometimes debt is just TOO much to handle. But for those suffering with debts there are solutions out there which allow them to avoid bankruptcy. Something simple like a debt management plan for lower debts or an IVA for UK residents (expect Scotland) who have debts over £12,000. Is there something similar in the USA?