Louise is considering if she can afford a new personal loan for taking a vacation in Europe. Currently, Gisele works as a marketing manager in an advertising agency, earning a gross income of $40,000 per month. Her employer withholds a total of $2,000 for retirement contributions from her monthly pay.
Each month, she also has to pay 4,200 for credit card debts, $3,500 for personal
debts and $2,500 for her education loan.
The new installment loan she needs for the European holidays will cost an additional
$4,000 per month.
What is Louise’s current debt payments-to-income ratio? Suggest if Louise can afford
the installment loan for her European trip or not.
Explain your answers. Show all your calculations
Debt payment to income ratio
From this ratio it indicates that Louise has credit worthiness therefore she can afford the installment loan for her European loan