Kim Lee is trying to decide whether she can afford a loan she needs in order to

Question

Kim Lee is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living at home and works in a shoe store, earning a gross income of $990 per month. Her employer deducts a total of $220 for taxes from her monthly pay. Kim also pays $85 on credit card debt each month. The loan she needs for chiropractic school will cost an additional $130 per month. Calculate her debt payments-to-income ratio without college loan. Remember to convert your answer to a percentage!

Explanation / Answer

Debt to income ratio = Total debt payments / Gross Income Gross Income 990 Total debt credit card debt 85 Debt to income ratio = Total debt payments / Gross Income = 85 / 990 *100 = 8.59% Gross Income 990 Total debt credit card debt 85 chiropractice school loan 130 Debt to income ratio = Total debt payments / Gross Income = 215 / 990 *100 = 21.72%

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