2013년 11월 24일 일요일

About 'debt or debts'|Too much debt or not enough demand A summary of the debate over America’s fiscal future







About 'debt or debts'|Too much debt or not enough demand A summary of the debate over America’s fiscal future








Statistically,               Americans               have               high               debt-to-income               ratios,               sometimes               well               over               50%,               which               is               what               causes               bankruptcy               and               destitution.

In               today's               society,               many               people               feel               compelled               to               spend               and               to               allocate               financing               for               whatever               cannot               be               immediately               afforded.

In               order               to               steer               clear               of               debt               -               or               to               identify               a               debt               problem               -               you               should               calculate               your               debt-to-income               ratio,               which               is               simply               the               percentage               of               your               income               which               must               go               to               paying               off               debts.

Creditors               calculate               your               debt-to-income               ratio               before               they               approve               a               loan               for               financing.

They               can               calculate               the               number               because,               through               your               credit               report               and               other               investigative               tactics,               they               can               find               out               how               much               you               owe               each               month               to               other               creditors.

This               is               important               to               them               because,               if               your               debt-to-income               ratio               is               high,               they               won't               want               to               add               to               that               debt,               thereby               running               the               risk               of               you               being               unable               to               pay               off               the               credit               you               are               asking               them               to               extend.
               According               to               bankrate.com,               creditors               avoid               consumers               with               a               debt-to-income               ratio               of               more               than               36%.

If               you               are               nearing               that               point               -               say               at               32%               -               you               might               be               charged               a               higher               interest               rate               or               be               approved               for               a               smaller               loan               than               the               one               you               originally               sought.

Mortgage               lenders               are               particularly               wary               about               debt-to-income               ratios               because               a               house               is               an               enormous               investment               and               far               too               many               consumers               default               on               their               loans.

This               presents               an               enormous               risk               to               lenders.
               Credit               counselors               and               other               experts               warn               against               consumers               developing               a               debt-to-income               ratio               of               more               than               20%,               however,               rather               than               the               standard               36%.

Once               you               hit               the               20%               mark,               you               are               swimming               into               dangerous               territory,               and               you               might               very               well               steamroll               yourself               into               massive               debt.

Consumers               who               have               higher               debt-to-income               ratios               are               more               likely               to               pursue               other               areas               of               financing,               which               simply               serves               to               compound               the               debt.

And               if               you               continually               pay               your               bills               on               time               and               maintain               positive               relationships               with               your               current               creditors,               future               lenders               are               more               likely               to               approve               financing,               which               just               continues               to               add               to               the               trouble.
               In               order               to               calculate               your               debt-to-income               ratio,               you               must               first               determine               your               monthly               income.

This               should               include               wages,               allimony,               child               support,               annuities               and               any               other               money               that               flows               into               the               household               on               a               monthly               basis.

If               your               paychecks               vary               from               month-to-month,               you               should               add               up               your               last               six               months               of               pay               stubs               and               average               them               to               get               a               standard               income.
               Next,               you               must               calculate               your               monthly               debts,               which               are               the               monthly               payments               on               all               outstanding               balances.

You               don't               need               to               include               your               monthly               bills               -               such               as               phone               and               cable               -               but               you               should               include               credit               card               minimum,               mortgage,               child               support,               allimony,               personal               loan,               business               loan               and               car               payments.

Leave               out               any               loans               or               credit               balances               that               will               be               paid               off               within               the               next               three               months.
               After               you've               calculated               those               two               numbers,               divide               your               monthly               income               by               your               monthly               expenses               and               you               will               get               your               debt-to-income               ratio.
               For               example,               let's               say               that               Sharon               has               a               monthly               income               of               $4,500               and               she               has               fixed               monthly               expenses               totaling               $1,050.

When               you               divide               her               expenses               by               her               monthly               income,               you               get               .21,               or               21%.

Sharon's               debt-to-income               ration               is               just               above               that               20%               line               we               talked               about,               but               right               now               she's               in               the               clear               as               far               as               major               trouble               is               concerned.
               However,               let's               say               that               Sharon               adds               $200.00               per               month               in               credit               card               bills,               a               $400.00               mortgage               payment               and               a               $500.00               personal               loan               to               her               debt.

She               has               now               increased               her               fixed               monthly               expenses               to               $2,150,               which               gives               her               a               debt-to-income               ratio               of               47%,               which               is               far               too               high.

It               is               easy               to               see               how               just               a               few               bills               can               exponentially               increase               your               debt-to-income               ratio,               making               it               that               much               more               difficult               to               crawl               out               of               debt.






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