Understanding Debt-To-Income Ratio & Why It Matters

Ever wondered, what is a good debt-to-income ratio and how it affects your finances? More importantly, if your debt-to-income (DTI) ratio is too high, can you use title loans to help with short-term financial challenges?

Your DTI ratio is the percentage of your pre-tax income that goes toward paying your debts. Lenders use this number to determine your ability to take on new loans.

If you know your debt-to-income ratio, then you can gauge how a financial institution will view if you qualify for loans. Here are the answers to the important questions you’ve probably asked about your income to debt ratio.

What Is a Good Debt To Income Ratio?

Lenders like to see a small debt to income ratio, as you probably gathered. Specifically, they don't usually touch you if you have one over 36%. Not to mention that no more than 28% of the debt should go towards paying off your mortgage.

Let’s do the math to give you a better idea about how your debt to income ratio is calculated.

Let's say you earn $4,000 a month. Your monthly mortgage repayments can't be more than 28%. So, to work out your maximum mortgage payment, you would need to divide 4,000 by 0.28. This equals $1,120.

Aside from the mortgage-related percentage, lenders will also calculate your total debt – which can't be over 36%, as we said earlier. To work this out with a $4,000 per month income, you would divide 4000 by 0.36. This equals $1,440. Your total debts can't equal over $1,440 in this scenario.

Does Debt Go Away Over Time?

Generally speaking, your credit card balances and similar debts have limits. But regardless of whether it’s three years or seven years, you still owe the debt. After all, people want to get their money back! So make sure to take care of them or they will stay with you.

Will Bankruptcy Get Rid Of All Your Debt?

Child support and alimony will not be eradicated if you file for bankruptcy. Tax debt and student loans can also be rather hard to shift too. However, you can always speak to a nonprofit credit counselor to see what they can do for you.

Can You Be Arrested for Unpaid Debt?

Federal regulations ensure that you cannot be arrested or threatened with arrest if you haven’t paid your debt.

However, you should bear in mind that debt collectors can sue you for their payment. If you don’t appear in court for this, then you may well have an arrest warrant placed on you to ensure you comply with court orders. But don’t worry, that’s rare!

How Can Debt Consolidation Loans Help?

If your debt-to-income ratio is too high, a consolidation loan can be used to pay all of it off. In other words, it puts all of your debt into one place so you're making a simple once-a-month payment instead of multiple smaller ones.

 

Can Title Loans Help When Your DTI Is High?

There are so many loan types available, but title loans are great for those of you with bad credit scores. This is a loan you receive when you put up your vehicle’s title as collateral. Now, usually, we wouldn’t recommend using this kind of loan to lower your debt-to-income ratio because this isn’t a long-term solution.

What Is a Title Loan?

A title loan allows you to use your vehicle’s title as collateral to secure fast cash. Unlike traditional loans, title loans don’t rely heavily on credit scores—making them a great option for those with bad credit.

Searching for "title loans near me"? Fast Auto Loans, Inc. offers quick and flexible title loans across Arizona!

The Benefits of Title Loans

There are many benefits to title loans that make them stand out from other more traditional loans. Those benefits include:

• The process can be done in as little as half an hour.
• You can start the application process at home.
• You can borrow anywhere between $300 and $15,000.
• You can keep your vehicle while you are repaying the loan.
• Bad credit isn't a problem. Whether you have a non-existent score, great score, or terrible score, we will work with you.
• We can be flexible with our repayment if you come to talk to us with time.
• You can use the title from any vehicle you own – car, truck, SUV, RV, or even motorcycle.

Pro Tip: Title loans should be used for short-term financial needs and not as a long-term debt solution.

How to Apply for a Title Loan

Going through our process is simple for anyone. Just follow our guide below:

1. Go to our website and fill out our online form. It shouldn't take you too long to complete since we ask for basic information only.
2. Once you have submitted your completed form, one of our loan reps will give you a call back almost straight away.
3. During the conversation, they will talk you through the rest of the process, answer any questions you have, and define the documents you need to have.
4. This is also when you can choose whether you want to meet the loan specialist at one of our car title loans stores near me or a more convenient location for you.
5. Regardless of which option you choose, you will need to have your vehicle, driver's license or state-issued photo ID, and the lien-free title to your vehicle.
6. One of our loan experts will examine your paperwork and conduct a basic inspection of your vehicle.
7. If our loan specialist deems you suitable for a loan, you will receive the amount you qualify for on the same day or the next bank working day.

Managing Your Debt & Finding Financial Solutions with Title Loans

If you want to better understand how a financial institution deems you credible to lend money to, you may want to start by calculating your debt to income ratio. And if you want to find your ratio, start by asking these important questions today.

Need urgent cash? Fast Auto Loans, Inc. offers quick and hassle-free title loans to help you get back on your feet.

Contact us today or apply online to get started!

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.