7 Ways to Lower your Debt to Income Ratio
3 minute read
May 19, 2014


lower debtNow that you’ve calculated your debt to income ratio and understand what it means to a lender, you may find that you need to lower your monthly debts. You are not alone, these are many people who are finding that they are currently over extended, or that they cannot qualify for the amount of mortgage they’d like to because their debt to income ratio is too high. Follow the techniques below to lower your monthly debt obligations.


1- Sell Your Car and Buy Something with Cash.

Removing your car loan can save you hundreds of dollars per month and result in a lower debt to income ratio when applying for a loan. Put the money saved from no car payment straight onto another monthly debt obligation. This will remove your hefty car payment and reduce other monthly debts as well.

2- Hold a yard sale

Gather up clutter that is around your home and hold a yard sale. Use whatever money you’ve earned to pay directly onto a credit card.

3- Consolidate your Student Loans

Many student loans have a minimum payment of at least $50, even for a small loan amount. Consolidate your student loans to a lower interest rate and see a large savings of having a much lower monthly payment. Instead of having 6 different payments of $50 you may have only one payment of $170, that a savings of $130!

4- Lower the Interest Rate on Your Credit Cards

Call your creditors and ask for a decrease in your interest rate. If you have a good payment history with your creditors use this a leverage to get that interest rate lowered. It won’t reduce your minimum payment but it will reduce your remaining balance quicker than before.

5- Lower other monthly bills

Call your insurance provider to negotiate a lower rate. Call your cable provider and try to get a promotion to reduce your monthly bill or cancel your cable altogether. The savings from these reductions can really add up and should be applied toward lowering your debt.

6- Pick up some secondary income

Do you have a skill or talent that you could use to earn an additional $200 each month? By dedicating 10 hours per month you could earn extra income to help eliminate some of your monthly debt obligations.

7- Reduce the amount you spend on eating out.

Make it a point to calculate how much money you are spending on eating out each month. You’d be surprised how quickly it can add up. If you are currently spending about $300 eating out, reduce that number to $100 and apply the difference toward your monthly debts.


Applying some or all of these techniques will allow you to lower your debt to income ratio and make your mortgage loan application even stronger.

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