Do You Have Too Much Debt?

Add up certain types of debt and compare the total to income to see if it's a problem and how to proceed.
NerdWalletAug 5, 2021

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Wondering if you have too much debt? Looking into your debt-to-income ratio can help answer your question. Add up your monthly debt obligations (things like auto loans, housing payments and credit card bills) and divide it by your monthly gross income. Debt loads in excess of 36% of your DTI can be difficult to pay off and can make accessing credit more challenging.

If you can't keep up with payments, or you're facing stress or sleepless nights, then it’s likely time to make a plan to  or look into .

Use the calculator below to tease out whether is problematic. The calculator will also offer recommendations for what to do next.

Enter various debts — such as credit card payments and medical bills — and your income into this calculator. Student loans and mortgages tend to be less problematic forms of debt, so set those aside for now.

View your result for these riskier types of debt in terms of possible solutions:

Think of those guidelines as a general rule of thumb. “There is no one rule for debt,” says David Nash, a certified financial planner at Magister Wealth in San Antonio, Texas. However, he adds, “If your debt level is increasing as a percentage of your income, that indicates some tougher tradeoffs need to be considered.”

It's important to separate the good, the bad and the toxic. A mortgage with an annual percentage rate of 3.5%, for example, can be weighed differently than a credit card with a 20% APR.

When the interest rate is low and fixed, and the loan is used to buy something that grows in value, like a house, business or college education. It’s also good if the interest is tax-deductible, like most mortgage and student loan interest.

Loans with high or variable interest rates that are used to buy things that lose value or get used up. Examples include high-interest personal loans for discretionary purchases like vacations, auto loans stretching five years or longer, or high-interest with increasing balances.

No-credit-check and with APRs above 36%, loans so long you end up paying more than the item is worth, or loans requiring collateral you can’t afford to lose, like your car.

Bad debt has crushing interest costs and limits your cash flow, savings and ability to borrow for goals like buying a home, says Erika Safran, a certified financial planner with Safran Wealth Advisors in New York City.

But a low-interest mortgage that you can comfortably afford shouldn’t keep you up at night.

The following guidelines give you an idea of how much is too much in these debt categories and what to do if you’re overloaded:

On a similar note...
Dive even deeper in Personal Finance