Financial stability is mandatory for
living with an absolute peace of mind. This might not be possible if you owe
thousands of pounds to creditors (from credit cards, loans, etc). The situation
may get worse if you are struggling to repay. Now you must be looking for a much
more manageable repayment structure. Simply put, you need a money saving expert for saving and building a secure future.
Nearly all debt solutions depend on
debtor’s monthly income and expenses, except bankruptcy that is the most a drastic way to get rid of your debts.
If you have ever applied for a loan,
you may have heard about the debt-to-income ratio. It’s the portion of your income
that goes into monthly debt repayments. It’s the primary component of your
credit worth. Therefore, whenever you ask a lender for a loan, he will consider your
credit score along with the debt-to-income ratio before approving your request. It’s
important because it helps increase your personal financial stability.
Just like you can use an IVA
calculator to check how much you can write off on your
debts, you can also calculate your debt-to-income ratio. All you need is to
divide all monthly payable debts by your monthly gross income. Remember, it
will not include your utility expense and insurance bills. For instance, you
have the following monetary scenario.
Let’s say your gross monthly income is
£3450 and total monthly debt payments (e.g. £200 car payment, £55 minimum credit
card payment, and £800 mortgage payment) is £1055.
In this case, your debt-to-income the ratio will be 30% (£1055/£3450)
It seems an ideal situation because
nearly all the lenders prefer this debt to income ratio below 36%. They take it
an indicator about your financial capacity of paying off your debt.
Lower the ratio, more money you have
than what you actually owe. It means you are having enough resources to pay off
your loan. In contrast, higher the ratio you are more likely to fall behind on your
debt repayments and possibly default on the debt that may eventually lead to
bankruptcy. For better understanding, you can get debt help UK
from
a reliable debt solutions provider.
How to manage a high debt-to-income ratio?
You need to manage your financial stability
by increasing credit worth if your debt to income ratio is too high. Here’s how
you can do this;
- Try increase your overall monthly income. Find supplementary ways to capitalize on your skills and get one more job.
- Demand a raise or switch to a better paying job. Remember, you must include your partner’s income if you have joint debts.
- Try to reduce your monthly debt repayment load. The easiest way for this is to pay off your credit card balance.
- Another easy debt to eliminate is your car loan with a low balance.
- Apply for Individual Voluntary Arrangement, or consolidate your debts into one loan to lower the repayment amount.
- Don’t take new debt until you clear previous ones or reduce what you owe to the creditors.
For more affordable repayments and
stopping creditors hassling you, get free debt advice
from
licensed insolvency advisors as ours at IVA Experts UK.
