Your DSCR, or otherwise known as your Debt Service Coverage ratio is a way to measure the amount of money that you’re going to have after making all of your loan / credit card payments for the month. A lot of credit / debt counseling services are going to use this formula to figure out what you can pay comfortably each month.
How can I figure out the DSCR on my own?
It’s actually quite simple! Let’s take a look at how you can figure it out, and what you can to get your number.
To calculate, you’re first going to want to add any interest expense that you have occurred from your loans. You can generally find these numbers right on the statements, of if you wish, you can log into your account as well to get them too.
Next, you will want to divide your cash flow for the month, year, or whatever you want to know. You will want to divide your cash flow by the payments that you’re going to have.
For example, let’s say for the month, you have $4,000 cash flow, and $2,000 in payments. $4,000 / $2,000 = 2.
If your answer is over 1, it’s going to mean that you’re in good hands, and you won’t have a hard time paying off your debts. Now, if the answer is below a 1, you’re going to have a hard time paying off your debts.
For example, after all bills, if you have a $750 cash flow, and $1,200 in bills, it’s going to be $750 / $1,200 = .62. This is a great formula to use when you want to understand if you’re going to be able to pay off your bills or not each, and every month.
Many major companies use it, and what you may find out is that on the statement, there may be a category called “DSCR.” Now that you know how it works, try it out for yourself, and see what your number is!
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