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AnthonyLeads's avatar

What is a good debt to income ratio?

Asked by AnthonyLeads (58points) 1 month ago

I’m wondering what is the proper ratio when you have a debt and a stable income per month.

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5 Answers

Caravanfan's avatar

I would lead with zero debt, at least zero consumer debt.

JLeslie's avatar

I like zero debt.

If you are counting a house mortgage, then I think the recommendation is not to exceed 33% of income for your mortgage payment, but of course you have to look at the whole picture, you can’t just use a ratio or percentage, because you have to take into consideration all of your expenses, and use your net income after taxes, etc., and calculate your budget including unexpected expenses like your car breaking down or medical appointment.

Before you go into any debt you should make sure you have at least a 6 month cushion in savings to afford all your expenses if you lose your job.

You should NEVER have credit card debt. I’m all in favor of using credit cards (get your points and money back perks) but you have to pay in full every month or you are just throwing your money on the street.

Use credit cards (assuming you have control) not only for the points and perks, but also you delay paying for goods so your money is in the bank longer and can earn some interest. Plus, it builds credit to have credit cards with open credit.

ARE_you_kidding_me's avatar

A mortgage is ok provided it does not exceed 30 percent of your monthly take home pay, fifteen year is best. A car loan is ok as long as it is financed for three years or less and payment less than half a weeks pay. Anything above that you probably can’t afford it. There is no good debt. None is the best ratio.

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