Debt Load

Debt load summary:

• A debt load is all the money someone owes to credit cards, student loans, mortgages, and other debts. 

• When your debt load is too high, it could be more difficult to keep up with the payments. Your financial stress could also increase.

• Debt relief could help reduce your debt load and get you back on track financially.

Debt load definition and meaning

A debt load is the total amount of debt you owe. It includes money owed to credit cards, student loans, a mortgage, car loans, personal loans—any debts you have outstanding. 

When you apply for a loan, lenders may consider your debt load and DTI. Your DTI, or debt-to-income ratio, measures how much of your income goes to debt repayment each month. If your debt load is too high, you could be denied for new credit.

Key concept: A debtor's total debt. 

More on debt load

You have debt, and that's nothing to be ashamed of. Understanding the debt load you're carrying is the first step in dealing with it.

Your debt load is how much you owe to all your debts. It's the balances on your credit cards and those doctor bills you still have to pay and what you owe on your student loans. 

A higher debt load isn't ideal, but it isn't the end of the world either. You could manage your debt load and reduce it with the right plan. 

Debt load: a comprehensive breakdown

You take on debt when you borrow money. The total of all the balances you owe is your debt load. 

Your debt load and debt-to-income (DTI) ratio go hand in hand when you apply for loans. Lenders look at:

• How much debt you have (your debt load)

• How much of your income goes to repay that debt each month (your DTI)

If your debt load and DTI are too high, you could be denied a loan. There's a simple reason why: too much debt could make you look like a risk to lenders. 

Your debt load can go up or down over time. As you pay down balances, your debt load drops. If you get a new loan or make credit card purchases, your debt load can go up. 

So, what is a good debt load to qualify for a loan? The type of loan can determine the answer. 

If you're trying to get a mortgage, then a debt load between 28% and 35% is usually acceptable. That's according to the Consumer Financial Protection Bureau (CFPB). If you're trying to get a personal loan or car loan, the lender may have a completely different number in mind. 

Less debt is better, whether you plan to apply for a loan or not. A lower debt load could mean less strain on your budget and less financial stress. 

Real-life example of debt load 

Let's look at how to calculate debt load and DTI. 

Jordan has a total of $25,000 in debt spread across three credit cards and two personal loans, plus a $300,000 mortgage loan. Jordan's debt load is $325,000.

Jordan pays $500 to the credit cards and personal loans each month. Jordan also has a $1,500 monthly mortgage payment. Jordan's gross (pre-tax) monthly income is $5,000. 

Jordan's DTI would be:

(Total monthly debt payments / gross monthly income) x 100

($2,000 / $5,000) x 100 = 40%. 

A DTI of 40% could put Jordan out of range for some lenders or loan types. How could Jordan reduce that debt load and DTI? The simplest solution is to pay down debt.

But if Jordan can't pay in full or is struggling to pay on time, that's not always realistic. 

If this is your situation, debt relief could help. A debt specialist can walk you through different options, like debt resolution or a debt management plan to help you find the best solution.