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Debt-To-Income Ratio Quiz: Can You Afford a Personal Loan?

Questions

Question 1: What aspect of your finances does the debt-to-income ratio measure?

  1. The value of all your assets versus all your debts. 
  2. The share of your monthly earnings that goes toward your debt obligations. 
  3. The total of all your credit card accounts. 
  4. The highest loan amount you’re eligible to receive.

(Hint: Lenders rely on the debt-to-income ratio to check your total debt load compared to your monthly income. It’s how they determine if you can afford a new personal loan and its repayment.)

Debt-To-Income Ratio Quiz Question 2: What makes a high debt-to-income ratio a concern for lenders when issuing personal loans? 

  1. It indicates you have set aside a considerable amount of money for leisure or personal use. 
  2. It signals that you might struggle to afford additional monthly loan payments. 
  3. It causes your credit score to go up automatically. 
  4. It indicates that your income surpasses your outstanding debts. 

(Hint: For this question, have it in mind that lenders use the debt-to-income ratio to assess whether a borrower can realistically meet additional loan obligations.)

Debt-To-Income Ratio Quiz Question 3: Which debt obligations typically factor into your debt-to-income ratio calculation? 

  1. Recurring debts like rent or mortgage, credit card minimums, student loan obligations, and auto loan payments. 
  2. Payments for food and utility services. 
  3. Payments for entertainment subscriptions and clothing items. 
  4. Contributions to savings and investment funds. 

(Hint: Loan affordability evaluations are based solely on recurring debt because daily spending does not effectively demonstrate if a borrower can afford a new personal loan.)

Debt-To-Income Ratio Quiz Question 4: What strategies can you use to decrease your debt-to-income ratio before asking for a personal loan?

  1. Raise your monthly expenditure to appear more active financially. 
  2. Pay off what you owe and steer clear of new credit obligations.
  3. Shut down all bank accounts to minimize visible cash balances.
  4. Submit applications for several loans at the same time.

(Hint: Lowering your debt-to-income ratio signals to lenders that you’re less likely to default. Discover how debt default could affect you.)

Debt-To-Income Ratio Quiz Question 5: What’s the typical maximum debt-to-income ratio lenders allow for personal loan approval?

  1. 0–20%
  2. 30–36% or lower
  3. 50–60%
  4. Over 70%

(Hint: Lenders typically prefer applicants who use only a moderate share of their income for debt payments.)

Need extra cash? Apply now to find out if you can afford a personal loan.

Debt-To-Income Ratio Quiz Answers & Rationales

Debt-To-Income Ratio Quiz Question 1

  • Correct Answer: B : Debt-to-income ratio checks how much of your monthly earnings is allocated to paying off debts, and this includes debt that you didn’t even know existed.
  • Rationale for A: It compares your monthly debt obligations against your income, and this does not include your assets.
  • Rationale for C: Your debt-to-income ratio does not take into account the number of credit cards you have.
  • Rationale for D: Your debt-to-income influences your eligibility, but it’s not the only factor used to determine if you can afford a personal loan. Other factors also play a role.

Debt-To-Income Ratio Quiz Question 2

  • Correct Answer: B : A high debt-to-income ratio indicates that a borrower will struggle to keep up with new loan payments because much of their income is already tied to other debts. 
  • Rationale for A: A high debt-to-income ratio isn’t about how much spending money a person has. Rather, it highlights the individual’s considerable debt burden, and cautions lenders to be careful when assessing loan eligibility.
  • Rationale for C: Having a high debt-to-income ratio won’t raise your credit score. It actually hurts your chances of loan approval.
    Rationale for D: A high debt-to-income ratio does not mean that you’re earning more than you owe. It shows that much of what you’re earning goes towards debt.

Burdened by multiple debts? Consider debt consolidation and pay your obligations comfortably.

Debt-To-Income Ratio Quiz Question 3

  • Correct Answer: A : Debt-to-income ratio is the sum of all monthly debt obligations including rent or mortgage, credit card minimums, and personal installment loan obligations. If applicable, it also includes child support and alimony payments. The sum of these bills is then expressed against your income as a percentage. 
  • Rationale for B: Groceries and utilities aren’t debt, unless you put them on credit. So, check your use of credit cards for daily expenses as it could raise your debt-to-income ratio. With Thanksgiving around the corner, get tips to help you save on groceries and decor.
  • Rationale for C: The costs for entertainment and clothing are regarded as living expenses, not debt obligations.
  • Rationale for D: Savings and investments contribute to your net worth, not debt responsibilities.

Debt-To-Income Ratio Quiz Question 4

  • Correct Answer: B : Lowering your debt-to-income ratio involves either decreasing paying off your debt or increasing your income. Doing both makes a big difference and bounces back your ratio faster.
  • Rationale for A: The more you spend, the greater your debt, and the higher your debt-to-income ratio. That’s why it’s important to examine your decision to make purchases on credit, especially high-ticket items. 
  • Rationale for C: Your debt-to-income ratio stays the same even if you close bank accounts. 
  • Rationale for D: More new loans mean higher debt responsibilities and negatively affect your debt-to-income ratio.

Debt-To-Income Ratio Quiz Question 5

  • Correct Answer: B : Lenders are typically certain that you can afford a personal loan when you have a debt-to-income ratio of 36% or lower.
  • Rationale for A: While it’s possible to have a very low debt-to-income ratio, most borrowers don’t typically have one.
  • Rationale for C: Most lenders consider a 50–60% debt-to-income ratio too risky and may deny a personal loan.
  • Rationale for D: A DTI ratio above 70% signals serious financial strain and it disqualifies borrowers. Nonetheless, this debt-to-income ratio quiz is designed to equip borrowers with strategies to help them lower debts, fix their ratios, and qualify for loans.

Turn your plans into reality. Apply for a personal loan today. 

Disclaimer: 

The Quzzies are provided by Minute Loan Center for informational purposes only to help customers understand credit usage and available loan options. Personal loans should be used responsibly for short-term or unexpected financial needs and are not intended as a long-term financial solution. Customers experiencing financial hardship or credit difficulties are encouraged to seek assistance from a qualified credit counseling organization.

Loan approval and terms are subject to verification of application information, underwriting review, and compliance with applicable state law. Not all applicants will qualify for the lowest advertised rates or for same-day funding. Funding times may vary based on bank processing schedules and customer verification requirements. Fees, repayment terms, and product availability differ by state. Please review your loan agreement carefully for complete terms and conditions. Please borrow responsibly. Loans are intended for short-term financial needs and are not a long-term financial solution.