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Debt-to-Income Ratio

"Debt-to-income ratio" refers to a calculation of how much your monthly fixed payments (minimum credit card payment, student loans, car loan, or mortgage) are in proportion to your gross monthly income. For example, if an individual's total monthly debt payment is $2000 per month and income is $4000 per month, the ratio is 2:4 or 50%. If the debt-to-income ratio is too high, some lenders are unwilling to offer additional credit or approve a new mortgage.

 

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   Internal Rate of Return

The "internal rate of return" or "IRR" is the discount rate often used in capital budgeting to determine the desirability of undertaking a project. Generally speaking, the higher the projected IRR (assuming other factors are equal), the more desirable the project.

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