Debt to Income
More often than not consumers are becoming angered and confused when searching out a loan and finding out they could not obtain the loan they were seeking. They often are confused as they met the advertised minimum credit score requirement yet still they found themselves denied. The reason some are is because of a calculation most lenders use to determine a consumer’s ability to borrow. This is know as DTI or Debt to Income ratio. This becomes even more important when seeking out bad credit loans. Most of our clients ask us how to get loans for bad credit and we always express to them that understanding their total and complete financial picture, which includes your DTI and current credit score, is imperative. Bad credit loans are easier to obtain if you are purchasing something that can be collateralized but getting bad credit loans without collateral the DTI requirements can be substantially higher. So to make bad credit loans easy, we have decided to explain a little more about debt to income and provide you with a tool, our DTI calculator. With this tool, in the process of your search, you can almost get bad credit loans with instant approval if done correctly.
What is DTI or the Debt to Income Ratio?
DTI or the debt to income ratio calculation, is your given income over one month divided by the sum of your debts. These debts are obligations listed on your credit report and include mortgages, car loans, collateralized obligations, student loans etc. They normally do not include items not listed on your credit report such as your cell phone bill, car insurance, or daily expenditures. The banks can see this information on your credit report and also directly from an application you may have submitted. They then use this formula as part of the process of assessing your risk as a borrower. It is one of the main qualifiers for any loan be it collateralized or a bad credit loan without collateral.
Why is your DTI so important?
Your debt to income ratio is important because it provides the bank with a figure which shows what your debt load is. This helps the banks understand how much debt you currently have, how you use your debt, and your capacity to carry more debt. They look at your monthly payments, how much debt you have out and your overall ability to maintain that debt or even pay it off. When asked how to get bad credit loans or about bad credit loans, in general, our advice is to take a look at your debt to income ratio and see where you stand. Why because you can offset your bad credit score or “credit history” risk by having a low DTI.If you have a low DTI you may get a bad credit loan with monthly payments which are higher due to your credit history and qualify because of you low debt to income ratio. If you are wondering what some acceptable DTI ratios are, we have found that for collateralized loans like Homes and autos they can be as high as 45% with the loan. For un-collateralized debts, especially bad credit loans without collateral. You should aim for a debt to income ratio between 15 and 25% before the loan. If you use the DTI calculator on this page for general purposes, most experts agree that for a normal individual or family you overall DTI is recommended to be around 33%.
How to use the DTI Calculator or Debt to Income Calculator?
To use the Loans Now debt to income calculator simply enter in your annual income after taxes. Then obtain your most recent credit report ( if you do not have a current report you can acquire one on the Loans Now Know Your Credit Score page) then add up the minimum monthly payments or monthly fixed payments and enter that data into the corresponding field of the debt to income calculator. Submit the data and our tool will provide you with your current debt to income ratio.
|45%+||High Debt Load|
In Summary, we hope that this information and tool help you to understand that much more how lending in general works and how banks and financial institutions assess risk.
Loans Now has been helping consumers understand how to get bad credit loans for over 5 years and making bad credit loans easy is what we do. Using the Loans Now Discovery process along with the other tools on this website should help you get bad credit loans with instant approval if you understand the steps.
- Loan Discovery Process
- Credit Scores Reviewed to 450
- 2, 3, 5 & 7 Year Terms
- Loan Amounts $500 - 70K