How Do you Know when you have Too Much Debt?

An accepted metric is your debt-to-income ratio. Add up all your monthly debt payments and divide them by your monthly gross income to get your debt-to-income ratio. For instance, if you have a R10,500 monthly mortgage, R2,500 car payment and pay R2,000 a month on credit cards and other bills, your monthly debt is R15,000. If your gross monthly income is R30,000, it means your debt-to-income ratio is 50%. It also means you should be losing sleep. Anything over a 43% debt-to-income ratio is a red flag to potential lenders. Evidence suggests that borrowers with a higher ratio are more likely to have problems making monthly payments. In most cases, you cannot get a mortgage if your ratio is over 43%.