Chapter 7 Financial Planning Exercise 3 Calculating debt safety ratio

Use Worksheet 7.1. Every 4 months, Larry Sun takes an inventory of the consumer debts he has outstanding. His latest tally shows that he still owes $3,750 on a home improvement loan (monthly payments of $100); he is making $100 monthly payments on a personal loan with a remaining balance of $600; he has a $1,750, secured single-payment loan that's due late next year; he has a $65,000 home mortgage on which he's making $850 monthly payments; he still owes $7,300 on a new car loan (monthly payments of $300); and he has a $1,150 balance on his MasterCard (minimum payment of $40), a $70 balance on his Exxon credit card (balance due in 30 days), and a $1,500 balance on a personal line of credit ($50 monthly payments).

Use Worksheet 7.1 to prepare an inventory of Larry's consumer debt.

Type of Consumer Debt	Creditor	Currently Monthly Payment	Latest Balance Due
Auto loans		$	$
Personal installment loans		$	$
Home improvement loan		$	$
Single-payment loans			$
Credit cards	MasterCard	$	$
(retail charge cards, bank cards, T&E cards, etc.)	Exxon	$
Personal line of credit		$	$
Totals		$	$

Find his debt safety ratio given that his take-home pay is $2,500 per month. Round the answer to 1 decimal place. %

Would you consider this ratio to be good or bad?

Check My Work