How to Calculate a Loan to Net Worth Ratio

by Louise Balle, studioD

The loan to net worth ratio is a simple personal finance calculation that gives an idea of how much loan debt you have in comparison to your net worth. It measures how you leverage your loan debt in relation to your personal net worth — the lower the ratio the better.

Identify the total of your current loan balances, including mortgages, auto loans and personal loans. Find this information on your latest loan statements. For example, assume you have $20,000 left on a mortgage loan account and $10,000 for a personal loan for a total of $30,000 in loans.

Subtract total liabilities from total assets to determine total net worth. For instance, if you have $50,000 in assets and $35,000 in total debts (including all types of obligations) your net worth equals $15,000.

Divide the total loan balance by your personal net worth. In this example calculate $30,000 divided by $15,000 to get two, which represents $2 of loan debt to every dollar of net worth.

About the Author

Louise Balle has been writing Web articles since 2004, covering everything from business promotion to topics on beauty. Her work can be found on various websites. She has a small-business background and experience as a layout and graphics designer for Web and book projects.

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