How much of my income should go to credit card debt?

Debt-to-income Ratio Banks believe that the amount of your monthly debt payments should be no higher than 36 percent of your gross monthly income. Ideally, it should be around 10 percent, but if it’s less than 20 percent, you’re still considered to be in pretty good shape.

What is the 20 10 Rule of borrowing?

A conservative rule of thumb for other consumer credit, not counting a house payment, is called the 20-10 rule. This means that total household debt (not including house payments) shouldn’t exceed 20% of your net household income. (Your net income is how much you actually “bring home” after taxes in your paycheck.)

What is a good monthly debt-to-income ratio?

Expressed as a percentage, a debt-to-income ratio is calculated by dividing total recurring monthly debt by monthly gross income. Lenders prefer to see a debt-to-income ratio smaller than 36%, with no more than 28% of that debt going towards servicing your mortgage.

How much of my income should be spent on debt?

The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.

How much income do you need to pay off a credit card?

Often, it comes down to your debt-to-income ratio, or DTI. Your DTI, which is expressed as a percentage, measures how much of your gross monthly income is allocated toward debt repayment. For example, say you earn $48,000 a year, which breaks down to $4,000 a month.

How much of your income should go to debt?

That means that your monthly debt should consume less than 36 percent of your monthly income. However, you use your gross, or pre-tax, income to calculate this ratio, which excludes expenses for food, utilities and other necessities.

What should my car loan be as a percentage of income?

There are caveats with the 15 percent threshold: If you have debt besides a mortgage, 15 percent is too high. If that’s the case, try to keep your car loan at 10 to 12 percent of your monthly income, and do your best to pay down high-interest credit card debt as soon as possible. Keep Other Costs in Mind

What should my mortgage be as a percentage of my income?

Try to keep your mortgage or rent cost at around 25% of your take-home income. For example, if your monthly household income after taxes is $5,000, then a good goal for your monthly mortgage payment or rent would be $1,250. I recommend that you only consider buying a house if you can afford the monthly payment on a 15-year fixed loan.