Calculate Your Debt-to-Income Ratio
Many financial advisors suggest that your total consumer debt load (not including housing debt) should be less than 20 percent of your annual net (after-tax) income.
The debt-to-income ratio looks only at your consumer debt and does not include money spent on a mortgage, rent, utilities or taxes. Consumer debt does include credit card payments, car loans, student loans and any other debts that you repay monthly.
Don’t forget to include debts that you are repaying to friends and family members in your debt-to-income ratio calculations. Even though debts like these don’t show up on a credit report, they still are part of your monthly debt responsibilities.