Lower Your Debt to Income Ratio

Fastest Way to Lower Your Debt to Income Ratio

Lower Your Debt to Income Ratio, Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. The lower your DTI, the better when it comes to qualifying for financing and getting favorable rates. If your DTI is too high, taking fast action to reduce it can really pay off. One of the most effective ways to quickly lower your DTI is through debt settlement. Here’s how it works and why it can rapidly improve your ratio: 

How Debt Settlement Lowers DTI

Debt settlement involves negotiating with creditors and collectors to settle accounts for less than the full balance owed. This directly reduces the total debt you are responsible for paying back, which in turn lowers your overall DTI.

For example, if you owe $20,000 across various credit cards and collections with minimum monthly payments totaling $600 per month, settling these accounts for 50% of the balances would reduce your total debt to $10,000. This would enable lowering your monthly payments to around $300, directly improving your DTI immediately.

Debt settlement provides one of the fastest ways to reduce total owed amounts, since creditors are often willing to accept discounted lump sum settlements to resolve delinquent accounts they may otherwise never collect on.

Removed From Debt Calculations

Another way debt settlement can provide an instant improvement to your DTI is that once you begin a settlement program, the accounts you are settling are closed and no longer counted towards your monthly obligations.
This can lower your DTI right away before any settlements are even reached. Your debt-to-income ratio is calculated based on minimum monthly payments owed. So removing accounts from this calculation means an immediate boost, even as you work towards final settlements.
For instance, if you have $1,000 in minimum credit card payments, but put $500 of that amount into a settlement program, your DTI would be calculated based on the $500 you still directly owe rather than the full $1,000. This essentially cuts your ratio in half immediately.

Lower Monthly Payments

Debt settlement programs usually involve making monthly payments into an escrow account that is then used to negotiate with creditors. The amount you contribute is less than what you were paying towards your debts before entering the program.
This further reduces the “debt” portion of your DTI calculation and ratio. For example, if your minimum payments previously totaled $1,000 across several accounts but you now pay $500 into a settlement escrow account, your effective debt payment for DTI purposes is lowered to $500.

During the settlement negotiation process, you are not making any direct payments to the accounts in the program. This temporarily frees up more monthly income to put towards other goals or payments until the accounts are settled.

Pay Off Debts Faster To Lower Your Debt to Income Ration

Settling your accounts for less than the full balance also lets you eliminate debts much faster. Debt settlement provides one of the fastest ways to become debt free.
For instance, settling a $10,000 credit card balance for $4,000 would immediately remove $6,000 of owed debt from your plate. This frees up monthly income faster to put towards other debts or expenses.

The less money you owe overall, the lower your debt to income will be since you have fewer monthly obligations. Rapid debt reduction improves your ratio quicker than simply making minimum payments over the long run.

Improved Credit Access

An improved DTI unlocks better access to financing including loans, mortgages and credit cards with lower interest rates. This makes managing your ongoing finances easier.
Lenders view debt settlement favorably because it shows you are actively addressing unhealthy debt levels and improving your financial position. As you reduce your DTI through settlement, more affordable borrowing options open up.

Find a Reputable Provider

If you decide debt settlement fits your situation, be sure to use a reputable provider. Legitimate, experienced settlement firms can make the process smoother and help negotiate deals not possible directly with creditors.

Debt settlement provides one of the most dramatic ways to reduce your DTI quickly. If you have high balances but steady income, settlement could be a viable path to unlocking approvals and better financing rates. Compare all options for your situation, and then take decisive action towards lowering your ratio.

We Provide Professionals to Assist You

At Second Start Financial, we are dedicated to helping you regain control of your life. Our mission is to provide you with effective debt relief solutions that address your unique financial situation. With a team of committed debt specialists, we work tirelessly to deliver the results you need to move forward with confidence.

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Embrace a fresh start and regain the control for your life!

Debt Is the Worst Poverty.

- THOMAS FULLAR

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