1. What is Personal Debt to Equity Ratio?

The Personal Debt to Equity (D/E) Ratio measures an individual's financial leverage by comparing total personal debt to personal net worth. It indicates how much debt a person is using to finance their assets relative to their net worth.

2. How Does the Calculator Work?

The calculator uses the Personal D/E formula:

Where:

• Total Personal Debt — Sum of all outstanding loans and liabilities (USD)
• Personal Net Worth — Total assets minus total liabilities (USD)

Explanation: The ratio shows how much debt exists for each dollar of net worth. Lower ratios indicate better financial health.

3. Importance of Personal D/E Ratio

Details: This ratio helps assess financial risk, creditworthiness, and overall financial health. Lenders often use it to evaluate loan applications.

4. Using the Calculator

Tips: Enter total personal debt and net worth in USD. Both values must be positive (net worth must be greater than zero).

5. Frequently Asked Questions (FAQ)

Q1: What is a good Personal D/E ratio?
A: Generally, ratios below 0.5 are considered healthy, while ratios above 1 may indicate excessive debt.

Q2: How is this different from corporate D/E ratio?
A: The concept is similar but applied to personal finances rather than corporate balance sheets.

Q3: Should I include mortgage in total debt?
A: Yes, include all debts - mortgages, car loans, credit cards, personal loans, etc.

Q4: How often should I calculate this ratio?
A: It's good practice to calculate it annually or whenever your financial situation changes significantly.

Q5: What if my ratio is too high?
A: Consider debt reduction strategies like paying down high-interest debts first or increasing income to improve your net worth.