Installment Debt
Debt that is repaid in fixed scheduled payments over a defined term, such as a car loan or student loan.
Installment debt has a beginning balance, a fixed term, and a defined monthly payment that pays off the balance by maturity. Auto loans, student loans, personal loans, and mortgages themselves are all installment debt, distinct from revolving debt like credit cards where the balance and payment fluctuate.
Underwriters treat installment debt differently depending on how close it is to payoff. Most guidelines let you exclude installment payments from your DTI when there are 10 or fewer payments remaining, which makes paying down a car loan to that threshold a high-leverage move before applying.
Deferred installment debts, like student loans in forbearance, still count toward DTI in most programs. The exact calculation can use the actual deferred payment, a percentage of the balance, or the income-driven amount, depending on the loan program's rules.
Related terms
Other terms you'll see alongside Installment Debt
The percentage of your gross monthly income that goes toward debt payments, including the proposed new mortgage.
The lender's formal review of a loan application to confirm it meets program guidelines and is acceptable to fund.
A three-digit number summarizing your credit history, used by lenders as a primary risk metric.
A lender's preliminary commitment to lend you a specified amount, based on a review of credit, income, and assets.
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