Mortgage lenders in particular are known for denying loans to people with debt-to-income ratios higher than 43%, but personal loan lenders tend to be a bit more forgiving - especially if you have a good credit score and proof of income. So if your monthly take home pay is $4,000, for instance, you should ideally keep all total debt obligations at, or under $1,720 each month. It might not seem like it because your monthly payments are so much smaller, but you actually end up paying more for the loan over its lifetime.Īs a general rule, borrowers should aim to spend no more than 35% to 43% on debt, including mortgages, car loans and personal loan payments. Others prefer to pay their loan off as quickly as possible, so they choose the highest monthly payment.Ĭhoosing a low monthly payment and a long repayment term often comes with the highest interest rates. Some people prefer to make their monthly payments as low as possible, so they choose to pay back their loan over several months or years. Lenders will sometimes provide an incentive for using autopay, lowering your APR by 0.25% or 0.50%. When you apply for a personal loan, you have the opportunity to choose which repayment plan works best for your income level and cash flow.
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