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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Financial obligation ratios are arguably a better measure of overall financial health because they include information front all households, not just those filing for bankruptcy or falling behind in their payments.
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