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, having debt is a part of our lives. Debt often means that you’re making progress toward achieving your goals like: owning a home, getting that diploma, or purchasing a car. The hope is that debt is manageable, and you can feel comfortable month-to-month. But the reality is that when debt payments start to creep up, it’s easy to feel overwhelmed. Debt stress is real.

Your debt-to-income (DTI) ratio expresses that feeling of debt stress into a percentage. DTI calculates how much of your monthly income goes toward debt payments.

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

P.S. DTI is especially important if you’re in the market for new credit

  • DTI helps to demonstrate how much financial stress a person may be feeling.
  • Lenders will use your DTI to help determine your ability to take on new debt.

Just so you know: Best Egg offers personal loans for debt consolidation, credit card refinancing, and for things like home improvement, vacation and adoption. We use DTI as a factor in helping us determine if you qualify for a loan with us.

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:

  • If you have a mortgage: up to 43%
  • If you do not have a mortgage: up to 34%
  • If you have a mortgage: up to 43%
  • If you do not have a mortgage: up to 34%
Healthy Debt-to-Income Chart

This chart is for illustrative purposes only. Every financial situation is different.

If you're in the light green: you should feel good about how much of your income is going toward your debt. You're likely in a healthy financial position and you may be a good candidate for new credit!

If you're in the dark green: you're likely in a good place for now—especially if you have a mortgage—but you may want to look into ways to reduce debt payments or increase your income, so you can feel confident about your financial health.

If you're in the gray: you're probably feeling a little strapped with your monthly payments as is. The good news is that there may be ways for you to pay down debt faster and save money, like a debt consolidation loan.

Wherever you plot yourself on the chart, it’s important to know that just like credit score, your DTI is just one component that makes up a larger financial picture.

Banks and lenders have determined over millions of transactions that DTI within these thresholds matters—and in situations when you’re applying for new credit—it often does matter.

However, there is no single statistic to determine your overall financial health. That’s why it’s important to keep track of finances—especially if you’re feeling the stress of debt.

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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Here’s the bottom line:

Your credit score doesn’t always show your full financial picture. When you understand more about your debt, you can keep track of your financial health, and make better financial decisions.

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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Won’t affect your credit score!