Sounds strange but true. You can get money when you don’t need it, but you can get it when you do. Here is the reason why. Your debt ratio is out of control.
If you have applied for loans or tried to get a line of credit and your credit score is decent and you still were denied, it was because your debt ratio is out of control.
The wealthy manage debt so that they can get good lines of credit, or mortgages at the prefered interest rates. They use other peoples money to make money, by investing it wisely, not buying things such as expensive cars and other non investment things. in order for you to do the same, you must have low debt to income ratio and decent credit or better. What does debt ratio mean? In simple terms, its the total amount of your bills in relationship to your total gross monthly income. A good to debt to income ratio (DTI)? 36% or lower. Here is an example how to calculate your DTI: Total bills = $3,100 Monthly Income = $6,300
Rent or mortgage $1,500 24% of income
Car payment $500 8% of income
Household Bills $900 14% of income
Credit cards $200 3% of income
Total bills $3,100 49% Income $6,300 $3,100 ÷ $6,300 = 49%
This is considered a high debt to income ratio. Your bills are nearly half of your income.
Most lenders will go up to a 43% DTI. Generally your household expenses should not exceed 33% of your income and debt payments (car & credit cards) should not exceed 30% of your income.
To get to a 43% DTI you will need to pay off your car loan ($500) then you will have a 41% DTI $2,900 ÷ $6300 = 41% Higher debt ratios tells the lenders that you may not be good at managing your finances and you are more likely to not be able to make your payments in the near future. In their eyes, you are a risk they do not want to take.
The wealthy borrow money to make money. They invest in vehicles ( Money making opportunities) that earn more than the interest payments on their loan.
A DTI smaller than 36% is preferable with no more than 28% of your debt going towards servicing your mortgage. In general the lower the number, the better chances of you be able to get the mortgage or line of credit you want.
You can do the same when you learn how with further training