Lenders' guidelines say that you are likely to have financial difficulties if your personal credit obligations exceed _____ of your take-home pay.
A) 15%
B) 20%
C) 10%
D) 3%
E) 25%

Question

Quizplus · Accepted Answer

Lenders typically use a debt-to-income ratio as one of the factors in determining if someone can qualify for a loan. This ratio is calculated by dividing monthly debt payments (such as credit card minimum payments, car payments, student loan payments, etc.) by monthly gross income. While different lenders may have slightly different guidelines, a common threshold for a healthy debt-to-income ratio is 36%. This means that your total debt payments should not exceed 36% of your gross income. Since take-home pay is lower than gross income (after taxes and other deductions), it is reasonable to assume that a healthy threshold for personal credit obligations would be lower than 36%. A common guideline used by lenders is that personal credit obligations should not exceed 20% of take-home pay. Therefore, the best choice is B) 20%.

Lenders' Guidelines Say That You Are Likely to Have Financial