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Debt Load: The "28/36" Rule

This rule is used by mortgage lenders:
-Your monthly household debt service should not exceed 28% of your gross monthly income
-Your total debt service, including your house payments plus all other payments should not exceed 36% of your gross monthly income

In Determining your Debt Load Limits Consider the Following:
-The stability of your income
-Your other regular expenses
-Your need for cash from month to month
-The changes in your cash needs as you age
-Your personal needs, wants, and goals
-Any extraordinary expenses that may come up
-Remember that debt Spends your future income
-Make regular savings a habit

Warning Signs:
It's hard to admit to having too much debt. Obviously or the world wouldn't be in the current economic state it is. Here are some warning signs that you are carrying too much debt:
-Next months bills come in before last month's have been paid off
-You get frustrated when you write checks because you have more bills than you thought you did
-You know what past-due notices look like
-You get overdue balances on credit card statements
-You avoid opening letters ( Confession of a shopaholic ring any bells)
-You hardly ever keep a running balance in your checkbook

Some Tools:
-Cost of Credit Calculator
-Are They in Trouble Worksheet
-Do you Know your Net Worth
-Cost of Credit Worksheet
-How to Handle Creditors

Debt Load

What is it?
Debt load is a term that is used to describe the amount of debt a consumer has. Creditors look at the Debt/Income ratio to see if consumers are carrying a "safe"amount of debt.

How do I Calculate it?
Add all of your non-housing monthly payments except for utilites and taxes. Then, Calculate your total annual gross wages and divide by 12. When you divide your monthly debt payments by your monthly gross income. You will get your monthly non-housing Debt/Income ratio; it is generally expressed as a percentage.

What does it Mean?
10% or less: You're in great financial shape
10%-20%: You will probably be able to get credit
20% or more: Too High !

Take the Debt Load Quiz