The debt ratio corresponds to the share that the expenses of a household represent in relation to its income. In order to know yours, we offer you this calculator , which will give you with precision your debt ratio .
It is the index allowing to evaluate the repayment capacities of a person or a household. This index therefore corresponds to the share of your expenses in relation to your income. Usually in United States, banking organizations recommend having a debt ratio lower than 1/3 of its income, the famous 33%.
The debt ratio also makes it possible to know its repayment capacities. Indeed, for any new loan, it will be difficult for you to obtain monthly payments making you exceed 33% of debt. The maximum reimbursable monthly payment will therefore be calculated.
AlgorithmTo obtain its debt ratio, the calculation method is very simple. All you have to do is add up your fixed costs and divide them by your total income. Multiply the result by 100 and you will get your percentage debt ratio.
What limits to the debt ratio?Depending on income, the "tolerated" debt ratio can be raised to 35% or even more. The impact on the remaining living of a household will indeed be less important, if the latter's income is higher.