Do you have too much debt? Use our calculator to help better understand your overall level of debt and what steps you might be able to take to improve your financial situation. By analyzing your income, mortgage payments and consumer debt load, you can evaluate if your current debt is manageable. Show
AssumptionsREQUIRED FIELDS* Monthly after-tax income ($)* Monthly mortgage payments* Total outstanding balance on consumer debt (includes credit cards, car loans, personal loans, student loans, excluding mortgage)* Calculate How Much Is Considered a Lot of Debt?One good benchmark to use to help evaluate your current level of consumer debt — which includes credit card debt, student loans, car loans, personal loans and mortgage debt — is your debt-to-income (DTI) ratio. To calculate your DTI ratio, add up all of your monthly debt payments and divide them by your gross (pre-tax) monthly income. For example, if your total monthly debt is $1,000, and you earn $5,000 in gross income each month, then your DTI ratio would be $1,000/$5,000 or 20%. According to the Consumer Financial Protection Bureau, research indicates that borrowers with higher DTI ratios run a greater risk of not being able to make their monthly debt payments. Generally speaking, most mortgage lenders use a 43% DTI ratio as a maximum for borrowers. If you have a DTI ratio higher than 43%, you probably are carrying too much debt because you are less likely to qualify for a mortgage loan. So if your monthly debt payment is $2,250 with a gross monthly income of $5,000, your DTI ratio would be 45%, which indicates you have a relatively high amount of debt.Good Debt vs. Bad DebtWhat’s the difference between good and bad debt? Good debt is a long-term investment in your future and puts you in a stronger financial position down the road, like having a home mortgage. Most people can’t afford to pay cash for a $200,000 house, which is why mortgage loans exist; plus, they make good financial sense. You can save for a house down payment of 20% ($40,000) and then take out a 30-year mortgage for the remaining 80% ($160,000). By assuming this debt, you have 30 years to pay back your mortgage, can deduct your mortgage interest from your federal taxes each year, assuming you itemize your taxes, and build equity in your home over time. At the end of this 30-year period, if your house appreciates 50%, the value of your home would grow to $300,000. This is considered good debt. After 30 years, you come out financially ahead. How Much Credit Card Debt Is Too Much?How can you determine if your current level of credit card debt is too much? Another helpful financial gauge used to monitor credit card debt is your credit utilization ratio, which is the percentage of credit you are currently using compared to the total credit you have available (referred to as revolving credit). Let’s say you have three credit cards with $10,000, $8,000 and $7,000 credit lines, respectively — for a total of $25,000. Your total credit card debt is $10,000, which means you are utilizing 40% ($10,000/$25,000) of your available credit. According to CNBC, it’s commonly recommended to keep your credit utilization ratio below 30% so you can maintain a higher credit score to get better terms and interest rates on loans and other credit cards. With this in mind, a 40% credit utilization ratio could be a good indication that you may have too much credit card debt. If your credit utilization ratio is high, you probably have a high DTI ratio, too — another warning sign that your credit card debt may be excessive. Other indications that you might have too much credit card debt, according to U.S. News & World Report, include paying off your credit card debt using other credit cards, paying only minimum payments on your balances, maxing out your lines of credit and realizing your credit card debt payments are nearing the total you spend on your other monthly bills. What Happens If You Have Too Much Debt?Having too much debt can have some serious consequences, which may interfere with your ability to achieve your financial goals in life. A large amount of debt can have a negative effect on your ability to secure other kinds of loans. For instance, excess credit card debt may impede getting the best terms and interest rates for a home mortgage or automobile loan. When you carry too much debt, your credit score is negatively affected. Your FICO® score, a specific brand of credit score created by the Fair Isaac Corporation, is a three-digit number between 300 and 850 based on information provided through your credit reports. It is calculated using your credit data across five different categories with various weights:
Using too much of your available credit (i.e., having a high credit utilization ratio) affects the amounts owed category (30%), and late payments affect your payment history category (35%), which when combined account for 65% of your FICO score. A lower FICO score can translate into less competitive interest rates and less favorable loan terms offered to you by various creditors, including lending institutions, credit card issuers and insurance companies. For your reference and comparison, here are the FICO score ranges and what they mean: FICO Score Range Rating Meaning 850 - 800 Exceptional This score demonstrates to lenders that you are an exceptional borrower. 799 - 740 Very Good This score demonstrates to lenders that you are a very dependable borrower. 739 - 670 Good Most lenders consider this a good score. 669 - 580 Fair Many lenders will approve loans within this score. 579 - 300 Poor This score demonstrates to lenders that you are a risky borrower.What Can You Do If You Have Too Much Debt?If you have too much debt, you may struggle financially to make all your monthly payments — which can lead to more anxiety and less financial security for you and your loved ones. Here are a few suggestions about what to do if you are carrying too much debt:
Using This CalculatorBased on your answers to a few assumptions, our debt calculator can quickly determine how much of your disposable monthly income is going toward paying down your debt. If your estimated monthly loan repayments exceed 45% of your disposable income, it may be financially challenging for you to make these payments if you can’t increase your income or restructure your debts. If your DTI ratio is even higher — more than 70% — it may be time for you to consult with a debt advisor. For the purposes of this calculator, a DTI ratio below 45% falls within reasonable limits based upon your current income and debt repayments. About Your InputsOur How Much Debt Is Too Much? Calculator asks you several questions about your income, mortgage and consumer debt to help you assess your current level of debt:
About Your ResultsAfter filling in your amounts for the financial assumptions, this How Much Debt Is Too Much? Calculator reports back your estimated monthly loan repayments and what percentage of your disposable monthly income this amount is. It will also indicate your level of difficulty in making these payments and offer possible recommendations on actions for you to take to address your current amount of debt. A summary table lists your take-home pay, mortgage payment, other debt (calculated as 2% of your current balance) and disposable income in dollar amounts as well as your short-term debt, mortgage payments and remaining disposable income as percentages of your take-home pay. More Personal Finance Calculators
Explore our variety of Financial Calculators to help assess your needs and achieve your financial goals. What is considered high rate debt?High-interest debt defined
There is no firm definition for what qualifies as a high interest rate. However, some experts define it as any rate above 6 to 8 percent. Many experts define high-interest debt as any debt with a higher rate than what “good debt” loans offer.
What is the maximum amount of debt you can have?Key Takeaways. In order to keep your debt load under control, a household may look to the so-called 28/36 rule. The 28/36 rule states that no more than 28% of a household's gross income be spent on housing and no more than 36% on debt service.
How much debt do most 30 year olds have?The average credit card debt for 30 year olds is roughly $4,200, according to the Experian data report.
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