Financial Obligation Ratio

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Financial Obligation Ratio

In personal finance, the ratio of mortgage payments, consumer debt payments, car payments and other debt to total disposable income. The financial obligation ratio shows how easily a person can make his/her debt service each month. This shows how likely a person is to default, which may affect his/her ability to take on more debt.
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The Financial Obligations Ratios for Homeowners and Renters
The second was to create a broader measure of household liabilities, the financial obligations ratio (FOR), which added recurring obligations--rent, auto leases, homeowners' insurance, and property taxes--that had not traditionally been included in the calculation of the DSR.
Because of changes in the mortgage and automobile markets, we created a new measure of household liabilities--the financial obligations ratio (FOR).
16) Thus, a separate financial obligations ratio for renters may indicate how the debt obligations of households with less income and less wealth have changed over time.
The financial obligations ratio for renters is substantially higher than that for homeowners (chart 4).
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