Is a 6% debt-to-income ratio good?
Your debt-to-income (DTI) ratio is how much money you earn versus what you spend. It's calculated by dividing your monthly debts by your gross monthly income. Generally, it's a good idea to keep your DTI ratio below 43%, though 35% or less is considered “good.”
However, our opinions are our own. See how we rate credit score services to help you make smart decisions with your money. Some experts say any loan above student loan or mortgage interest rates is high-interest debt, a range of about 2% to 6%.
A DTI ratio of 35% or less shows you're managing your debt well. This range may increase your chances of getting loans with competitive rates. It also means you likely have money left over for saving and unexpected expenses. If your DTI ratio falls between 36% and 41%, you may still be in good shape.
The optimal debt-to-equity ratio will tend to vary widely by industry, but the general consensus is that it should not be above a level of 2.0. While some very large companies in fixed asset-heavy industries (such as mining or manufacturing) may have ratios higher than 2, these are the exception rather than the rule.
The Federal Reserve tracks the nation's household debt payments as a percentage of disposable income. The most recent debt payment-to-income ratio, from the third quarter of 2024, is 11.3%. That means the average American spends about 11% of their monthly income on debt payments.
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
A “good” mortgage rate is different for everyone. In today's market, a good mortgage interest rate can fall in the high-6% range, depending on several factors, such as the type of mortgage, loan term, and individual financial circumstances.
35% or less: Looking Good - Relative to your income, your debt is at a manageable level. You most likely have money left over for saving or spending after you've paid your bills. Lenders generally view a lower DTI as favorable.
The average American owed $103,358 in consumer debt in the second quarter of 2023, the latest data available, according to credit bureau Experian.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
What is too high for debt to ratio?
36% to 49% means your DTI ratio is adequate, but you have room for improvement. Lenders might ask for other eligibility requirements. 50% or higher DTI ratio means you have limited money to save or spend. As a result, you won't likely have money to handle an unforeseen event and will have limited borrowing options.
Apple (AAPL) Debt-to-Equity : 1.45 (As of Dec. 2024)
Amazon.com (AMZN) Debt-to-Equity : 0.46 (As of Dec. 2024)
The Standard Route is what credit companies and lenders recommend. If this is the graduate's choice, he or she will be debt free around the age of 58. It will take a total of 36 years to complete. It's a whole lot of time but it's the standard for a lot of people.
The average salary in the U.S. is $66,622, according to the latest data from the Social Security Administration. How your salary compares will depend on your industry and skilI set, as you'd expect.
Quick Answer. The average credit score in the U.S. was 715 in 2024, unchanged from the 715 average in the third quarter (Q3) of 2023. The average credit score was 715 in 2024, according to Experian data. That average, as of the third quarter (Q3) of 2024, is unchanged from the same quarter in 2023.
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance. Private mortgage insurance.
If your monthly income is $2,500, your DTI ratio would be 64 percent, which might be too high to qualify for some credit cards. With an income of roughly $3,700 and the same debt, however, you'd have a DTI ratio of 43 percent and would have better chances of qualifying for a credit card.
When the ratio is more around 5, 6 or 7, that's a much higher level of debt, and the bank will pay attention to that. “It doesn't mean the company has a problem, but you have to look at why their debt load is so high,” says Lemieux.
At 6% fixed interest, you'll pay a total of $1,909 in interest on the $15,000 loan, or $328 more. Borrowing the same amount for the same time with 7% fixed interest rates = a total of $2,241 in interest -- or $660 more than you would at 5 percent.
How much would a $5000 personal loan cost a month?
| Loan Amount | Loan Term (Years) | Estimated Fixed Monthly Payment* |
|---|---|---|
| $5,000 | 3 | $154.36 |
| $5,000 | 5 | $102.68 |
| $10,000 | 3 | $313.32 |
| $10,000 | 5 | $205.36 |
Although there is no strict definition for high-interest debt, many experts classify it as anything above the average interest rates for mortgages and student loans. These typically range between 2% and 7%, meaning that interest rates of 8% and above are considered high.
Debt-to-income ratio of 42% to 49%
DTIs between 42% and 49% suggest you're nearing unmanageable levels of debt relative to your income. Lenders might not be convinced that you will be able to meet payments for another line of credit.
A debt ratio between 30% and 36% is also considered good. It's when you're approaching 40% that you have to be very, very vigilant. With a threshold like that, you're a greater risk to lenders. You may already be having trouble making your payments each month.
Key takeaways
Your debt-to-income (DTI) ratio represents the percentage of income you have left after making monthly debt payments. Your DTI is a key factor in mortgage approval. Most lenders see DTI ratios of 36% or below as ideal. Approval with a ratio above 50% is tough.
