Question

Elysha has a monthly gross income of $3,000 and a monthly debt load of $500. How can her debt-to-income ratio be classified?

Answer 1

Answer: Good—between 15 and 20 percent

Explanation: All you have to do is find what the different percents of 3,000 are and see which one is the closest.

Answer 2

Her debt to income ratio is classified as favorable

Step-by-step explanation:

The given information are;

Elysha's gross monthly income = $3,000

The amount she pays as debt each month = $500

Therefore, her debt to in to income ratio, DTI, is given as follows;

DTI = (Amount payed as debt)/(Gross income) = $500/$3,000 ≈ 0.167

We multiply by 100 to express the result as a percentage, to get;

0.167 × 100 = 16.7%

Given that her debt to income ration is less than 35%, her debt to income ratio is classified as favorable and she has a manageable debt.