2 ms·
Debt to income or debt to asset is the only way of evaluating if someone's debt is high or low. I thought it was obvious that's what GP meant.
by triceratops 3y ago
Debt to income or debt to asset is the only way of evaluating if someone's debt is high or low. I thought it was obvious that's what GP meant.
- mym1990 3y agoI did not get that assumption from "The more debt you have, the less financially resilient you are". Debt is an absolute value, and debt-to-asset ratio is...not. You can also evaluate debt loads by debt-to-income ratio, which is not to be overlooked as most homeowners buy homes based on their income, rather than their savings. As others have said, debt-to-asset is also not a golden ratio, because if your assets are not liquid and you get called for your debt, you still have a bad situation.
- triceratops 3y ago> You can also evaluate debt loads by debt-to-income ratio, which is not to be overlooked Debt to income is literally the first thing I wrote in my comment. I didn't overlook it. The absolute value of a debt is a meaningless number so "more debt" should always be evaluated in that context. And that's how I took the comment I originally responded to. Some extremely obvious things are being rehashed for no apparent reason in this thread. When evaluating relative debt load, asset values should have a multiplier to reflect both liquidity and volatility.