Why should you calculate your debt ratio?
Your debt ratio indicates your repayment capacity when you make a loan application to your financial institution. The debt ratio is determined by comparing your gross monthly income with your monthly financial obligations.
When you calculate your debt ratio, you will have a good idea of your current financial situation.
Calculation of debt ratio
– A debt ratio below 30% is considered excellent.
– A ratio of 30%–36% is considered acceptable.
– A ratio higher than 40% could jeopardize the approval of a loan.
If your debt ratio is above 50%, there is a good chance that you are unable to pay for certain expenses not included in the calculation of the debt ratio such as food, personal expenses (other than those charged to your credit cards), transportation and others.
Some people experience temporary financial problems, others face more long-term financial challenges. Regardless of the context, it is important to diagnose your weak points in your financial situation to remedy it.
Book your free and confidential consultation at one of our offices located in Montreal, Pointe Claire, Laval and Longueuil.