How do I know when I can afford debt?

Business & Finance
Tutor: None Selected Time limit: 1 Day

In our class, we are learning about Personal Finance Literacy unit3 money management.

I have some questions about it

1.How do I know when I can afford debt?  

2. When can I afford more debt?

3. What will happen if I don’t pay my bills?

Could you answer me for free please

Jul 12th, 2015

Thank you for the opportunity to help you with your question! Hi, He observes that work expands so as to fill the time available for its completion.

1.how do i know when i can afford debt?

Before you take on any debt, you need to determine the amount of money you can afford to borrow while still having money available to do other important things, debt come with cost and therefore you should be very cautious when going for it.

2.When can I afford more debt? 

When determining your allowable amount of debt, you need to know the following terms: front end ratio and back end ratio. Your front-end ratio is your total monthly housing cost divided by your gross monthly income. The back-end ratio is the total of all of your debts and your housing costs divided by your gross monthly income. When adding up these expenses and debt, your front-end ratio should never exceed 28 percent, and your back-end ratio needs to stay at or below 36 percent.

3. What will happen if I don’t pay my bills?

if you dont pay the debt, some charges may be imposed to you account so as to cover for the reasonable cost in collecting the debt from you. As well as force may be applied.

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 12th, 2015

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