How much debt is too much debt?

Great Answer

Professionally Researched. (What's this?)

On One Hand: Maintain A Healthy Ratio

The amount of debt individuals can comfortably take on depends on the individual's gross income and debt-to-income ratio. To calculate your debt-to-income ratio, you simply need to divide your monthly debt payments by your monthly income. A safe debt-to-income ratio is around 35 to 40 percent. So, for example, if you earn $3,000 a month, you would want to keep your monthly debt payments below $1,200.

On the Other: Some Debts Are Worse Than Others

You should also consider that there are different types of debt that can affect how much you can comfortably pay each month. Secured debts, like mortgages or car loans, retain significant amounts of value or increase in value. Unsecured debts, like credit cards, are not investments and can be burdensome if you cannot work or suddenly have less income.

Bottom Line

Try to accumulate as little unsecured debt as you can, and always ensure your total monthly debt payments amount to less than 40 percent of gross income.

Source:

Care One: Understanding Your Debt Ratio

Smart Money: Do You Have Too Much Debt?

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