A debt-income ratio is the percentage of debt amount out of the total income of an individual. A higher percentage of debt to income ratio usually creates a problem for people to make their payments. To avoid non-payments, one will go for a loan modification procedure. This is how debt-income ratio is related to loan modification.

A higher interest rate on loans (auto, home, etc) will be charged on a person with a high debt-income ratio as according to banks and financial institutions, the person is not credit worthy enough to offer a low interest rate.

A loan modification either for auto or home is a procedure wherein a loan modifier negotiates the terms and conditions of loan with banks/ lenders/ financial institutions. The usual process takes around 2-4 weeks time. Banks agree to extend the term of contract thereby reducing the monthly payments which helps to lessen the financial burden of the borrower.

A stable income can also be insufficient if any uncertainties arise. Thus, it is best to keep all your bills and expenses low to increase your savings which will be of use in case of medical or other emergencies.

A low amount of debt with a higher income is a dream for each individual. Thus, pay all your debts by reducing its monthly amount.

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