What is a debt load? |
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Answer:
A debt load, depending on the individual can A debt load isn't a figure represented by a sliding scale or categorized with names. It is a ratio or percent that shows the ratio of debt compared to your income. I think it would make finance more interesting if it were categorized with names. I know a few people that could be categorized as having a Debt Boat Load, or even a Sh%t Load of Debt. No, the debt load is what a bank, lender or creditor will calculate and evaluate whether or not your debt load to income is applicable for the loan in which they are willing to assume the risk for. Your debt load can be calculated by taking your gross take home and dividing it by your debts. Don't include your mortgage payment in the equation. So if you are taking home $4000 per month and your monthly debts including bills such as electricity, cable, car payment etc. equate to $2000 then your debt load or debt to income ratio is 50%. Lenders won't tell you exactly what a good debt load is permissible for any of their loan products but usually anything ranging from 0-40% should be considered average. Don't be terribly concerned about your ratio, as I mentioned each lender is a little different and as long as you are able to cover your debt and have good credit then you should be in good shape. Trackback(0)
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