Debt Repayment Calculator
Results
Your estimated monthly loan repayments are which equate to % of your net monthly income.
| Summary | |
| Take-home pay | |
| Less: mortgage payment | |
| Less: other debt payments (loans & credit cards) | |
| Equals: disposable income | |
| Mortgage payments as a percentage of your take-home pay | % |
| Other debt payments as a percentage of your take-home pay | % |
| Disposable income remaining as a percentage of your take-home pay | % |
Brits owe a lump sum of £1.680 Trillion in debt. The average debt per UK adult rounds up to £31,845. To top it all, over 300 people are declared bankrupt every day in the UK. So how big of a problem is debt for Britons? Yes, read that again!
We’re juggling our responsibilities on a unicycle on the rope of life. When debt is thrown into this mix, things can go off-balance. But debt is inevitable. So it’s up to us to find a way to deal with it responsibly to maintain the equilibrium.
To master the art of managing debt(s), you must understand what exactly you’re dealing with – secured or unsecured debt.
While your house might increase in value over time, the home theatre system that you bought with your credit card, won’t. However, one can’t deem everything other than a house as an unnecessary expense. After all, it’s these little things that make a house a home!
Thus, one must know how to differentiate ‘good’ debt from ‘bad’ debt and to understand just how much debt is too much. There is no single variable to solve this problem. There are formulas to calculate the same. Take a look at our debt calculator to organize your debt better.
How Much Debt is too Much?
Efficient money management is the elixir of your financial life. It is a critical skill that one must acquire. Even the tiniest of mistakes can pile up and jumble up your finances. This can be detrimental to both your financial and mental health.
Living in denial about your financial problems will only make things worse. Is there a way to determine if your debt pile is way more than what you can handle?
Below are some signs that could indicate financial turbulence:
You delay your bill payments
If you live payday to payday and struggle to keep up with your bills, you face financial problems. This adds to debts, and your debt pile may become a mountain quickly. Watch your repayment pattern closely; if you’re struggling, you must alter your financial plan.
You don’t know how much you owe
If you’re in denial about your debt situation, you’re scared to face your financial problems. There is no easy escape route other than accepting your situation and working towards improving it. Creating a budget and limiting your expenses can be of great help. An early indication of this problem might be that you did not use a debt repayment calculator (UK) before taking the loan and had no idea how much your monthly instalment would be!
Sleep doesn’t come easy to you
Do you toss and turn in bed but still can’t fall asleep? Debt may be the reason behind it. Debt can lead to rising stress levels and loss of sleep, consequently, a dip in your performance. Therefore, efficient financial management helps you bring balance to your lifestyle.
What is Debt to Income Ratio
Regardless of your income, a standard protocol is followed when lenders assess your affordability and credibility. This ratio of your monthly debt repayment over your gross monthly income is called the debt-to-income (DTI) ratio. You can crunch some numbers using the formula below:
DTI = Recurring monthly debt / Gross monthly income
This ratio is expressed in percentages and should ideally be below 35%.
Recurring Monthly Debt
Recurring monthly income is the sum of repayments that you make every month. For instance, if you have a mortgage payment of £1500, an automobile loan repayment of £100 and £400 for other debts, your Recurring Monthly Debt would be £2000 (£1500+£100+£400).
Gross Monthly Income
Your gross monthly income is the amount of money you’re earning in a month before you file your taxes, pay for insurance, social security, etc. Now let’s assume that your gross monthly income is £6000. So, as per the above formula, your DTI would be 33% (2000 / 6000 * 1000).
A DTI of over 43% could make it hard for you to get a mortgage. Most lenders are open to DTIs of up to 36%. Financial advisors suggest that your DTI be maintained at 35% or below. Some might stretch it to the 36%-40% mark. But anything over 35% means you owe a significant debt.
Warning Signs
Here are some signs that indicate financial trouble or a debt problem:
Your Recurring monthly debt amount is high.
You’re struggling with debt collectors.
Frequent use of balance transfer cards or refinancing to avoid sinking.
You often use cash advances.
Your loan and credit card applications don’t go as planned.
You don’t have and aren’t building an emergency fund/savings fund.
You’re avoiding your debt problems or don’t know how much you owe.
You have never used a free debt repayment calculator to get a purview of your monthly liabilities.
You do not have a budget, and you’re constantly in debt.
Your card gets declined as you’ve maxed it out.
Your debts are impacting your relationships.
How to Keep Your Debt Under Control
There’s no one rule when it comes to controlling debt. What works for one may not work for the other. So approaching financial planning with a ‘one size fits all outlook will not benefit you. However, there are some common pointers that all of us could learn a thing or two from:
Contemplate your spending habits and change them if required.
Make a budget to plan your expenses.
Prioritise your repayments. Use a paying-off debt calculator in UK
Keep making minimum repayments if you’re struggling to repay the full amount.
Build an emergency fund to be your financial cushion.
Avoid taking on new debt.
Tame Your Financial Anxiety
Debt is a necessary evil. We all owe one of the other forms of debt. What’s important is the way you deal with it. If you continue to spend over your limits and make debt a habit, it’ll deteriorate your financial health. Your credit score takes the biggest hit if you fail to demonstrate responsible credit behaviour. This could also ruin your chances of getting a loan in the future.
We understand how difficult making repayments can be in this post-COVID-19 period. With layoffs and wage cuts, making ends meet takes a lot of work. The best you can do is structure your finances into a budget and adhere to it. Even making minimum monthly repayments can build you a compelling case.
Use our free debt repayment calculator to assess your affordability and plan your finances accordingly.
If you need help bridging some of your financial gaps, LoanTube can help. Compare rate-locked loans from multiple lenders to find your ideal loan.
FAQs
What should I check out for before applying for any loan?
It is highly recommended that you check your credit score before applying for a loan. Since your credit score will directly impact your chances of approval and APR, you must try to improve the score as much as possible and only apply for a loan.
Moreover, we also suggest against applying for multiple loans at once, as it might harm your credit score.
On what basis should I choose a loan?
While it may seem tempting, you should not simply pick a loan because it comes from a renowned provider. When you want to choose between two or more lenders, you must take a quick look at the following aspects and then pick the one that best suits your needs and preference –
- Eligibility Requirements
- APR (While the actual APR may differ from the advertised APR, FCA Approved Lenders in the UK are bound to offer loans at or below the advertised APR to over 51% of the applicants)
- Early Repayment Fee
- Overpayment Charges (if any)
- Flexible Offerings such as Repayment Holidays
- Your Estimated EMI as per Debt Pay-off Calculator UK
Also, always read the fine print before signing off the loan papers.
Should I take out a loan to pay off my credit card?
If your credit card company levies a significantly higher interest rate than a loan, you can use a loan to pay off your credit card. You can also use your loan to pay off more than one of your debts.
You can use our UK Credit Card Debt Repayment Calculator for more clarity.
