To be financially healthy it is very important that you keep your debts to a level that you can afford. Life, unfortunately, is not a straight line. There will be moments when your financials are suffering – and you must make sure that when these moments occur you can manage your debts.
To find out use the ĠEMMA My Debt Affordability Calculator.
![debt affordability pic 3](https://gemma.gov.mt/wp-content/uploads/2020/06/debt-affordability-pic-3.png)
![debt affordability pic 2](https://gemma.gov.mt/wp-content/uploads/2020/06/debt-affordability-pic-2.png)
Technical your level of debt affordability is known as the ‘debt to income ratio’. To determine your level of debt affordability you are to list all of your disposable income ( that is you income after deducting the income tax and social security contributions payments) and all of your debts. Examples are shown in the Table below:
Disposable Income | Outstanding Debt Payment |
Wage / Salary | Home Loan |
Allowance | Car Loan |
Overtime | Personal Loan |
Performance | Credit Card |
Fringe benefit | Hire Purchase |
IF YOUR LEVEL OF DEBT AFFORDABILITY IS:
21% to 35% | You are exposed |
36% or higher | You are in trouble |
If your level of debt affordability is 36% or high take the following steps:
- Avoid taking on more debt.
- Make sure you first pay the debt on your essentials – the mortgage on your home – first.
- There after make sure you pay the debt with the highest interest rate and Annual Percentage Rate (APR).
- See whether you can increase your income so that you can pay off more of your debt.