Debt is usually stressful at any level, so sometimes it's difficult to get a sense of when you've accumulated too much debt. To determine if you need Ohio debt relief, you'll need to calculate a few different ratios that are explained in more detail in what follows.
The two most critical measures of how you're managing financially are your income and the amount of debt you have. Ideally, your income should be significantly higher than your debt payments. On the other hand, simply making more than you spend is not necessarily an indication that your debt is in check. You might actually need Ohio debt relief and not be aware of it. For this reason, you should examine your debt-to-income ratio, which is a far better indication of just how much debt you really have.
There are innumerable ways to calculate a debt-to-income ratio, and the one that is right for you will depend on your goal in calculating it. For example, if you want to apply for a mortgage, your debt-to-income ratio will include housing expenses and should fall below 36 percent. However, for the purpose of determining your Ohio debt relief needs, you'll want to focus on "bad" debt, or all debt besides your mortgage payment. To figure out your bad debt ratio, you add up what you spend on your credit card payments and car payments and divide that number by your gross monthly income.
For example, say your car payment is $300 per month and your credit card minimum payments are another $300 per month. Assume your total monthly income is $2400 per month. You would divide $600 by $2400 to yield a bad debt ratio of 0.25 or 25 percent. Typically, if your bad debt ratio exceeds 10 percent, you probably need some type of Ohio debt relief. Refinancing, debt consolidation, budgeting, and credit counseling are all examples of debt relief services that can help improve your bad debt ratio.
Although your bad debt ratio is more relevant when assessing your need for Ohio debt relief, your total debt ratio can also be helpful. Your total debt ratio will give you a big-picture overview of where you stand with all of your debt obligations. Usually, if your bad debt ratio is too high, your total debt ratio will also be elevated. In either case, Ohio debt consolidation can help. You can figure out your total debt ratio the same way you calculated your bad debt ratio, but remember to include housing debt in your calculation this time. A healthy total debt ratio should not be larger than 30-40 percent.