How Healthy
Is Your Debt?

Not all debt is bad.

Check on the health of your debt and learn how it impacts your financial health.

healthydebt

Get to know the relationship between debt and income

For most of us, debt is a part of everyday life. We are often weighed down by credit card or other consumer debt that prohibits us from making the financial progress that we seek. But don’t be discouraged. Not all debt is bad. In fact, some debt that we accumulate can actually be beneficial and help reach our goals in life. It’s healthy debt. Healthy debt is manageable debt that helps you make progress toward achieving your life goals like owning a home, furthering your education, or purchasing a car.

 

Why should you care about debt-to-income (DTI) ratio?

Your debt-to-income (DTI)  calculates how much of your monthly income goes toward debt payments. To put it simply, it’s your monthly debt payments divided by your gross monthly income. So why is your DTI ratio important? Your DTI not only assesses how healthy your debt is, but it’s one factor in how lenders measure your ability to manage your monthly payments, and consequently, your ability to repay the money you wish to borrow.

See how your debt stacks up.

What is considered a good DTI varies from lender to lender. However, the Consumer Financial Protections Bureau (CFPB) provides this rule of thumb:

  • 35% or less = Good
  • 36-43% = Acceptable but Needs Work
  • 44% and up = Bad
  • 35% or less = Good
  • 36-43% = Acceptable but Needs Work
  • 44% and up = Bad

Calculate your (DTI) here!

No matter how your debt-to-income ratio stacks up, remember that DTI is just one component that makes up a larger financial picture. There are plenty of other metrics that are considered when determining your personal financial health, like your credit score.

Understand your Debt-to-Income Ratio (DTI).

Knowing your DTI is an essential factor to understanding your financial health.
Enter your income and debt payments to calculate your DTI and see how healthy your debt is.

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Your debt is at a manageable level and you most likely have money left over for savings each month. You should feel good about how much of your income is going toward your debt!

The CFPB advises to start small, plan for the unexpected, and save for the future. You're likely in a healthy financial position to begin or continue actively saving, start an emergency fund, and set money aside for retirement!

Experts say you're likely in a good place for now—especially if you have a mortgage—but there is room to improve! You may want to look into ways to reduce debt payments or increase your income.

This could put you in a better position to handle unforeseen expenses, save for future goals, and feel confident about your financial health!

The CFPB suggests to start small by evaluating your savings and making a savings plan. Next, plan for the unexpected and eventually for the future.

Remember, if you find yourself in a situation where you need to borrow, a fixed rate-fixed payment personal loan is a healthy way to budget and ensure you pay off your debt in a set period of time.

Check out Best Egg’s personal loan options with no impact to your credit score!

More than half of your income is going toward debt payments. Unfortunately this could limit your borrowing options, your ability to save for unforeseen events, and ability to plan for retirement.

The good news is that there may be ways for you to pay down debt faster and save money! Here are three tips to reducing your debt:

  1. Make a debt reduction plan (read more)
  2. Find simple ways to improve your debt or to increase your income (read more)
  3. Combine multiple debts into a single consolidated loan with fixed payments and a clear pay off time

No matter how your debt-to-income ratio stacks up, remember that DTI is just one component that makes up a larger financial picture. There are plenty of other metrics that are considered when determining your personal financial health, like your credit score.

How do you feel about your debt right now?

Help us learn more about how people navigate debt in their daily lives.

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Ready to adjust your monthly payments?

If you think your debt payments are too high, consider consolidating debt and credit cards with a Best Egg personal loans. You can refinance high-interest debt, lower your monthly payments and could improve your DTI health over time.

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