A debt ratio is required by lending institutions before a consumer can successfully apply for a loan. A calculation of the ratio becomes a daunting challenge to a consumer. A number of indebted households questions chip in, where finding out whether you are in debt becomes a challenge. Further still, determining the debt ratio and pondering the consequences of high debt ratio also haunt consumers. This is normally needed before a consumer gets to have the loan application processed.
This ratio is calculated from the gross income of a household occupant, where different terms plays role. Some situations may demand that the ratio should not exceed a certain maximum, say 40 percent. It therefore goes without say that going beyond the maximum debt ratio lead to automatic disqualification. A consumer must therefore know how to maintain a certain debt ratio.
Some financial institutions may lure their customers to borrowing more many than they actually need. This strategy is employed by lowering interest rate as one borrows more money. If a consumer is not careful enough, borrowing more money would eventually become a risk. What matters are the returns on the investment; here a little money may bring more money than bigger ventures.
What determines the debt ratio? This is a question which depends on factors such as the family or marital status of an applicant. Some consumers may be married while others may be in child support obligation. Other considerations range from accumulated interests on loans, mortgages or rent. Some consumers may have individual debt repayment programs ranging from insurance premiums to car loan arrears.
Further questions include is the determination of indebtedness period and the repercussion of such a situation. A bank or other lending institution may demand for a statement showing the financial status of a household occupant. The period of indebtedness normally depend on many factors though the rule of the thumb is employment status never counts. Whether one is working or not, repayment of debts is mandatory, and it is such a demanding task that requires monthly contribution.
A concerned household consumer may also wonder whether private property such as a car or a house may be attached to cater for the household arrears. In case of a lease, the particular asset is deemed to belong to the leasing company and may therefore be free from possession by creditors. In case where a property, say a vehicle has a material value, the creditors or trustees may advice the client to buy back the property. This is done by the consumer paying a certain monthly installments.
Are there further consequences of being over indebted? In deed there are and one has to find out the impact on such before it is too late. A consumer may be allowed by a bank to operate an account as far as they prove to be worth it. One will therefore be required to prove his or her trustworthiness by providing valid documents. Fraud is very discouraged and any attempt to try the same can leave the consumer disqualified by operating any bank out.
Can the indebted household consumer be at liberty to transact personal businesses? Again, a few rules apply here though one would carry out a self employment venture without many worries. Being an administrator of a corporate company is the only limiting factor, and therefore one can only operate under less managerial role.
This ratio is calculated from the gross income of a household occupant, where different terms plays role. Some situations may demand that the ratio should not exceed a certain maximum, say 40 percent. It therefore goes without say that going beyond the maximum debt ratio lead to automatic disqualification. A consumer must therefore know how to maintain a certain debt ratio.
Some financial institutions may lure their customers to borrowing more many than they actually need. This strategy is employed by lowering interest rate as one borrows more money. If a consumer is not careful enough, borrowing more money would eventually become a risk. What matters are the returns on the investment; here a little money may bring more money than bigger ventures.
What determines the debt ratio? This is a question which depends on factors such as the family or marital status of an applicant. Some consumers may be married while others may be in child support obligation. Other considerations range from accumulated interests on loans, mortgages or rent. Some consumers may have individual debt repayment programs ranging from insurance premiums to car loan arrears.
Further questions include is the determination of indebtedness period and the repercussion of such a situation. A bank or other lending institution may demand for a statement showing the financial status of a household occupant. The period of indebtedness normally depend on many factors though the rule of the thumb is employment status never counts. Whether one is working or not, repayment of debts is mandatory, and it is such a demanding task that requires monthly contribution.
A concerned household consumer may also wonder whether private property such as a car or a house may be attached to cater for the household arrears. In case of a lease, the particular asset is deemed to belong to the leasing company and may therefore be free from possession by creditors. In case where a property, say a vehicle has a material value, the creditors or trustees may advice the client to buy back the property. This is done by the consumer paying a certain monthly installments.
Are there further consequences of being over indebted? In deed there are and one has to find out the impact on such before it is too late. A consumer may be allowed by a bank to operate an account as far as they prove to be worth it. One will therefore be required to prove his or her trustworthiness by providing valid documents. Fraud is very discouraged and any attempt to try the same can leave the consumer disqualified by operating any bank out.
Can the indebted household consumer be at liberty to transact personal businesses? Again, a few rules apply here though one would carry out a self employment venture without many worries. Being an administrator of a corporate company is the only limiting factor, and therefore one can only operate under less managerial role.
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