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A debt ratio is an important financial indicator of your financial health.

Loaners use it to predict if you’ll be able to respect your monthly payment.

How to quickly calculate your debt ratio

It’s easy to calculate your debt ratio by your own. It’s the total of your revenue divide your total monthly payments.

Exemple of revenue: (Work, pension, placements, rent income, etc.)

Example of monthly payments: (Car loan, rent, home loan, taxes, credit cards, loan, line of credit, etc.)

When you calculate, it’s important to note that any spending that isn’t a loan is not counted. So, groceries, restaurants, gas, cellphone/internet, electricity is not counted

Is my ratio good?

Here’s a little chart to help you to analyze your ratio.

  • 0-30% Excellent
  • 30-35% Good
  • 35-40% Average
  • 40% and higher, bad or high risk

To keep a healthy credit score, it’s preferable to keep the debt ratio under 30%.

If your debt ratio is over 40%, your situation can be considered as critical and it will be harder for you to get new credit.

For a car loan, some specialized loaner of 2nd chance will go up to 55%. On the other hand, your interest rate will be higher.

We don’t recommend you getting new credit when your ratio is that high. The only exception is if you’re in a temporary situation and you can get back up fast.

For each credit loan application that we get, we rate your debt ratio and we do a complete analysis of your credit report before applying to any loaner. By working that way, we can tell where you can qualify and direct you to the right loaner, preventing you from doing too many applications and hurting your credit score.

If your credit report needs to be analyzed by a specialist to get a car loan, you can do it for free with us.

Katy Fontaine august 27th 2018

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