How do you know how much debt you can comfortably afford?
What will be an ideal response?
Answer: By applying the debt limit ratio you can see, from a lender's point of view, the limitation on consumer debt. It is calculated by dividing your monthly non-mortgage debt payments by your total monthly take-home pay. Ideally, it should be below 15% because you will still have some borrowing reserve for emergencies and the unexpected, and it will be easier to obtain additional borrowing. You should put a maximum of 20% on consumer debt. Once you pass this point, it will be difficult to borrow more, and your ability to meet your monthly financial obligations will be severely limited.
You might also like to view...
Because digital media are interactive, they blur the line between content providers and consumers.
Answer the following statement true (T) or false (F)
The average rate at which we speak is between ______ words per minute.
a. 50 and 100 b. 125 and 175 c. 200 and 250 d. 500 and 550
Which of the following is an example of Web-browsing software?
A) Microsoft Internet Explorer B) Adobe Acrobat Reader C) Outlook Express D) BitTorrent
Which of the following is true of the Dodd-Frank legislation?
A) Federal Deposit Insurance Corporation-insured institutions are required to keep their interests in hedge funds and private equity funds. B) Investment banks have to set aside reserves to cover all forms of expenditure. C) Originators of mortgage securities must hold 5 percent of the credit risk, thus retaining an interest in the performance of the securities. D) Banks will be allowed to trade in a proprietary manner but cannot continue to buy or sell from their own accounts to hedge against other investments.