Question

Which of the following is considered by a debt ratio that is similar to the GDS ratio but broader in scope?

A) Only housing-related debt
B) Personal loans (auto or furniture loans)
C) Credit card debt
D) All of the above

Answer 1

The debt ratio that is similar to the GDS ratio but broader in scope is the Debt to Income (DTI) ratio. It takes into account all debt obligations, including housing-related debt, personal loans, and credit card debt.

Step-by-step explanation:

The answer to this question is option D) All of the above. The debt ratio that is similar to the Gross Debt Service (GDS) ratio but broader in scope is the Debt to Income (DTI) ratio. The DTI ratio takes into account all debt obligations a borrower has, including housing-related debt, personal loans, and credit card debt.

For example, if a borrower has a housing-related debt of $1,000, a personal loan of $500, and credit card debt of $500, their total debt would be $2,000. If their monthly income is $5,000, their DTI ratio would be 40% (debt of $2,000 divided by income of $5,000). A lower DTI ratio is generally considered favorable, as it indicates a lower level of debt burden.