Loans for people with debt obligation

One of the questions that is often asked is whether or not you can get loans for people with debt obligations. And the answer to that question is.. of course.

What a debt obligation really is, is a promise to pay back money that was borrowed. So, you credit card balance is a debt obligation. Your car loan is a debt obligation. Even you mortgage payments are debt obligations.

The real key to understanding debt and debt obligations are your income to expenses. The more income you have, the more debt you can take on. Conversely, the more expenses you have, the less debt you can take on.

The way this is expressed is or measured in the finance industry it called the debt to income ratio. Simply put, this means how much debt you have compared to your income.

For many years, it was seen that you should no more than 28-36% of your gross income that goes to debt. That means, that you can’t have debt payments over 30%. Someone making 100,000 a year should have no more than 30,000 going to debt payments.

Because of the current financial situation we are in in the United States, that number may actually be lower now. Banks and credit institutions are all working to be much more conservative these days and are making borrowing much harder.

So, back to the original question of “Can I get loans for people with debt obligation?” The answer is that it depends on your current debt to income ratio and your credit score.

If your debt is under 30% and you have good credit, then it is very likely that you can get more loans.

One thing to keep in mind. If you have large lines of credit, it may be more difficult to get additional loans. The reason for this is your lender may consider the possibility that you could run up balances on all the lines that are open, and then not be able to pay.

So, while having large credit lines is an idication of a persons ability to manage debt, it can also work against you if you have too many open balances and available credit.

Some people have consolidated all their loans into one. This is often done with a home mortgage refinance. This way, all balances can be comvined, and, in many cases today, the monthly payment can be lowered. Just a few years ago, it was not uncommon for someone to have a 8-9% interest rate on their mortgage. But just last week, new mortgage rates were released and you can see rates in the low 4% range. These are the lowest rates that have been seen since mortgage rates were tracked by Fannie Mae…

Now, to the other possible down side. As of Today, Aug 8, Standard and Poors just downgraded Fannie Mae and Freddie Mac’s credit worthiness. While the stock markets have reacted negatively to this, it is still unkonwn as to what will happen to interest rates in the near future.

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