as the Truth-in-Lending Disclosure Statement and the loan agreement. Says Gatling, “Know what you’re getting into. Accept your responsibility and you won’t be surprised if the debtor can’t meet the payments.”
“Anyone who pays out 45% or more of their monthly income to creditors is considered a high credit risk and shouldn’t take on anymore debt,” according to James Agnew, executive vice president of ConsumersFirst (800-497-6222 or www.cfdebt .com), a firm that helps consumers resolve debt and credit issues. Before you co-sign for anyone, insist that they calculate their debt-to-income ratio (see formula below), since it’s a good indicator of whether they have debt problems.
Debt-to-Income Ratio = Monthly Amount of Debt
Monthly Gross Income