The Average Consumer Debt As Percent of Income

Ratios and percentages help banks and financial experts determine consumer debt averages. Some organizations use these figures to make determinations about the economy as a whole. Others use them, especially the personal income to debt ratio, as guideline for loaning and loan terms.

Definition

Consumer debt as percentage of income shows how much debt consumers have, in relation to their other income. This figure is often used with disposable income, or the income that remains after consumers have paid for unavoidable expenses, like taxes and other items. Debt is composed of elements, including mortgage debt, credit cards and auto loans.

Averages

In 2010, the average American consumer spent about 12 percent of their disposable income on debt. When other payments like car leases and property taxes (other common expenses that accompany debts) are added into the estimation, it increases to 15 percent. There is a sharp difference between homeowners and renters. Although homeowners tend to have mortgage debts to pay off, for renters the number rises to 24 percent for the total amount of debt.

Lending

Lenders pay careful attention to these percentages when deciding on interest rates and setting approval requirements on their loans. They often alter the disposable income number to gross income, or income before taxes. Lenders may be willing to accept as much as a 36 percent debt-to-income ratio and still give a loan, but lenders like to see it lower. If individuals have about 10 percent debt to income, they can qualify for a loan much more easily.

Changing the Ratio

Individuals who want to change their debt-to-income ratios can either control their spending or increase their income levels. From an economic perspective, the ratio changes as consumers become more wary of debt and begin saving money.