How much debt is too much debt? (2024)

FAQs

How much debt is too much debt? ›

Debt-to-income ratio targets

Most lenders say a DTI of 36% is acceptable, but they want to lend you money, so they're willing to cut some slack. Many financial advisors say a DTI higher than 35% means you have too much debt. Others stretch the boundaries up to the 49% mark.

$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month.

What's considered too much debt is relative and varies by person based on the financial situation. There's no specific definition of “a lot of debt” — $10,000 might be a high amount of debt to one person, for example, but a very manageable debt for someone else.

$2,000 in credit card debt is manageable if you can pay more than the minimum each month. If it's hard to keep up with the payments, then you'll need to make some financial changes, such as tightening up your spending or refinancing your debt.

Key takeaways

Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.

The average student loan debt owed per borrower is $28,950, so $80K is a larger-than-average sum. However, paying off your balance is possible. Since payments on an $80,000 balance can be high, extending the repayment term to lower monthly payments may be tempting.

Personal debt can be considered to be unmanageable when the level of required repayments cannot be met through normal income streams. This would usually occur over a sustained period of time, causing overall debt levels to increase to a level beyond which somebody is able to pay.

Is 70k debt a lot? ›

What is considered a lot of student loan debt? A lot of student loan debt is more than you can afford to repay after graduation. For many this means having more than $70,000 – $100,000 of total student debt.

Bad debt is an amount of money that a creditor must write off if a borrower defaults on the loans. If a creditor has a bad debt on the books, it becomes uncollectible and is recorded as a charge-off.

Bad debt – a tiny but menacing threat!

The bad debt to sales ratio measures the slice of revenue a company loses because customers aren't settling their invoices. In 2022, the average bad debt to sales ratio for enterprise businesses was a mere 0.16%.

The average American owed $103,358 in consumer debt in the second quarter of 2023, the latest data available, according to credit bureau Experian.

35% or less: Looking Good - Relative to your income, your debt is at a manageable level.

Spot the signs of debt stress

Finding it hard to sleep or eat. Avoiding friends, family and loved ones. Finding it hard to focus on work or other tasks. Dealing with depression, anxiety or other mental illnesses.

The general rule of thumb is that you shouldn't spend more than 10 percent of your take-home income on credit card debt.