Author Topic: Debt/Income Definition - probably not what you are thinking....  (Read 2201 times)

Mickey

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Debt/Income Definition - probably not what you are thinking....
« on: February 27, 2013, 07:40:19 PM »
Been on prosper for a few years now. Have a portfolio of around $10K . One of the most important factors for me when choosing a loan is the debt to income ratio.

I just spoke with a Prosper CSR to better understand how it is calculated. Here is what I got:

* Ratio is pulled from the reporting agency.
* Agency may or may not include mortgage payment in the ratio calculation. In most cases it is not included.
* Student loan payments are excluded from the ratio.
* The full requested amount from Prosper Loan is already included (added) in the D/I calculation.

Now assuming this is true, it seems that this criteria is very weak to rely on when choosing a loan to invest in as most likely mortgage and student payments can easily have the largest payment amounts of a borrower.

Do you use this filter when it comes to loan selection? anyone has any different information from the one I got from Prosper CSR?

Would love to get your insight on this.

Thanks,

Mickey
« Last Edit: February 27, 2013, 07:42:10 PM by djmikmik »

Randawl

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Re: Debt/Income Definition - probably not what you are thinking....
« Reply #1 on: February 27, 2013, 08:04:36 PM »
I use DTI as a factor in considering each loan as a part of the whole picture.  I generally don't use a hard line filter to exclude any particular DTI.

Peter

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Re: Debt/Income Definition - probably not what you are thinking....
« Reply #2 on: February 28, 2013, 12:49:32 PM »
I was told a couple of years ago that DTI did not include mortgage payments so I have always assumed that to be the case. Like Randawl, DTI is only a secondary screen for me.
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Dennis

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Re: Debt/Income Definition - probably not what you are thinking....
« Reply #3 on: March 01, 2013, 02:13:12 AM »

* Student loan payments are excluded from the ratio.


This is something I've been wondering about for quite some time.   I'm a little ticked off if it's true, especially since there's no disclosure of that at either LC or Prosper.  Now I know why so many of my low DTI's have gone belly up. 

Given the prevalence of student loans in this country, I consider the lack of disclosure of them in DTI negligent.  I'm not at all happy about finding this out but thanks Mickey for bringing it to light.  I too had put a lot of weight on that number for loan selection.  I feel misled and cheated now.