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Do I have too much debt?

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Shot of a young couple sitting in the living room at home and using a laptop to calculate their finances

As long as you don’t owe too much, loans and credit cards can be useful financial tools. But how do you know if you have too much debt? How much debt is too much? In this article, we’ll help you determine if your debt is too high, and what you can do if it is.

Here’s what we’re going to cover:

  • How much debt is too much?
  • What is DTI?
  • Signs that you have too much debt
  • How can I reduce my debt?
  • Oportun: Affordable lending options designed with you in mind

Key takeaways:

  • Your debt-to-income ratio (DTI) is a quick way to tell if you have too much debt. To calculate your DTI, divide your total monthly debt payments by your monthly income before taxes. A high DTI usually means too much debt.
  • Other signs that you may have too much debt include living paycheck to paycheck, struggling to save money, and relying on credit cards to pay for basic needs.
  • There are steps you can take to pay down your debt gradually. You can reduce your debt over time by spending less money each month, making larger debt payments, and consolidating your debt.

How much debt is too much?

The amount of debt you can afford depends on your income. The more you earn, the more you can afford in debt payments each month. If you can’t make your monthly payments on time, then your debt is too high.

Many lenders look at your debt-to-income ratio (DTI) when you apply for a loan or credit card. This helps them decide whether to approve your application.

What is DTI?

Debt-to-income ratio, or DTI, is a quick way to tell if you have too much debt. To calculate your DTI, divide your total monthly debt payments by your gross monthly income. (This means your income before taxes are taken out.) To turn that number into a percentage, multiply it by 100.

Let’s say you have an auto loan, a personal loan, and a credit card, and your monthly debt payments total $500. If you earn $2,000 each month, then you would divide 500 by 2,000. This gives you a DTI of 0.25. The same amount can be written as 25 percent.

Now you can check your DTI against the ranges shown below.

35 percent or less

If your DTI is less than 35 percent, you probably don’t have too much debt. This range of debt is considered affordable by many financial experts.

36 percent to 49 percent

If your DTI is within this range, your debt may still be affordable. However, you probably don’t have room in your budget for another loan or credit card.

50 percent or higher

If your DTI is in this range, most financial experts would say that you have too much debt. You may want to create a debt payment plan to help you pay down your debt balances each month.

Signs that you may have too much debt

Calculating your DTI is just one way to measure your debt. Here are some other signs that you may have too much debt.

  • You live paycheck to paycheck
  • You rely on credit cards to pay for basic needs
  • Your total debt isn’t going down, even though you make your payments on time
  • You can’t afford to save money for an emergency fund
  • You can’t afford to contribute to your retirement savings

If any of these are true for you, your debt may be holding you back from a better financial future.

How can I reduce my debt?

Fortunately, there are ways to reduce your debt over time. You may want to try the suggestions listed below. Small steps can make a big difference in helping you get out of debt.

1. Avoid adding more debt

The first step is to stop adding more debt to your balance. To do this, you may need to reduce your monthly spending.

Here are some ways to save money each month.

  • Cook at home more often
  • Shop at discount grocery stores
  • Take advantage of coupons and sales
  • Make coffee at home
  • Walk or bike to save money on gas
  • Remove any unused features from your phone or cable TV service
  • Enjoy free entertainment

As you reduce your monthly spending, you’ll have more money available to use toward paying down your debt.

2. Increase your monthly payments

By making larger debt payments each month, you can get out of debt faster.

After you’ve made the minimum payments on each of your credit accounts, choose one debt to focus on. Put any extra money toward this debt. Once it’s entirely paid off, you can start paying down the next debt. Continue this process until all your debts are paid off.

3. Follow a debt payment strategy

Having a consistent strategy can make it easier to get out of debt. Here are two popular payment methods to consider. You can choose the one that feels best to you.

The snowball method

With the snowball method, you pay off your debts in order from the smallest balance to the largest balance. This allows you to experience the feeling of success as soon as you cross that first debt off your list. This sense of accomplishment can motivate you to keep going until you’re out of debt.

The avalanche method

With the avalanche method, you pay off your debts in order from the highest interest rate to the lowest interest rate. This method allows you to save the most money on interest while you’re paying off your debt.

What are interest and interest rate?
Interest is the amount you pay the lender for borrowing money, in addition to paying back the original loan or credit card balance. Your interest is determined by a percentage called the interest rate.


4. Create an emergency savings fund

Using all your extra money for debt payments will help you get out of debt faster. But you may also want to consider putting aside some of your income to create an emergency savings fund.

If you get a costly bill or have an unexpected expense, you can pay it using cash from this emergency fund instead of adding debt to your credit card. Think of this fund as a safety net to keep you from going deeper in debt. If an emergency comes up, you’ll be prepared for it.

5. Apply for a balance transfer credit card

Applying for a balance transfer credit card may help you save money on interest.

Often balance transfer credit cards come with an introductory period when you don’t have to pay any interest. By transferring your entire debt to this card, you can take advantage of the zero-interest period, which typically lasts between six and 18 months. This will allow you to save money on interest while you’re paying off your debt.

6. Take out a debt consolidation loan

Another way to save money on interest is to consolidate your debt with a loan. With this approach, you take out a loan and use that money to pay off all your existing debt. After that, you’ll only have to make one debt payment.

If you qualify for a low interest rate on your loan, you could enjoy affordable debt payments at the same time that you save money on interest.

Oportun: Affordable lending options designed with you in mind

Now that you understand how to tell if you have too much debt, you can learn about how Oportun may be able to help you if you’re looking for affordable credit options.  Visit our homepage to learn about:

  • Personal loans
  • Secured personal loans
  • Credit cards
  • And more!


Experian. Average U.S. consumer debt reaches new record in 2020

Investopedia. Debt-to-income (DTI) ratio: What’s good and how to calculate it.

Investopedia. How do credit card balance transfer work?

The Pew Charitable Trusts. The complex story of American debt


The information in this site, including any third-party content and opinions, is for educational purposes only and should not be relied upon as legal, tax, or financial advice or to indicate the availability or suitability of any Oportun product or service to your unique circumstances. Contact your independent financial advisor for advice on your personal situation.

Personal loans through Oportun subject to credit approval. Terms may vary by applicant and state and are subject to change. If you refinance, you may pay interest over a longer period of time or at a higher rate and the overall cost of your loan may be higher. Loans in CA, ID, MO, NM and WI are originated by Oportun, Inc. California loans made pursuant to a California Financing Law license. NV loans originated by Oportun, LLC. In AL, AK, AR, AZ, DE, FL, GA, HI, IL, IN, KS, KY, LA, MI, MN, MS, MT, NC, ND, NE, NH, NJ, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA and WY loans are originated by Pathward®, N.A.. Terms, conditions, and state restrictions apply.

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