Question

makayla takes home $4400 per month from her job as a physical therapist. if her only debt obligations are a car loan payment of $530 and a mortgage payment of $760 every month, is she in danger of credit overload?

A. no, because $530 is less than $880
B. yes, because the sum of $530 and $760 is greater than $880
C. yes, because $530 is less than $880
D. no, because the sum of $530 and $760 is greater that $880

Answer 1

To determine if Makayla is in danger of credit overload, we first need to summarize her take-home pay and debt obligations:

- Monthly take-home pay: $4400
- Car loan payment: $530
- Mortgage payment: $760

Next, let's calculate her total monthly debt payments:

Total debt payments = Car loan payment + Mortgage payment
Total debt payments = $530 + $760 = $1290

Next, credit experts often suggest that your total debt payments should not exceed a certain percentage of your take-home pay. A common threshold is often around 20% of your monthly income. Let's calculate what 20% of her take-home pay would be:

20% of $4400 = 0.20 × 4400 = $880

Now we compare her total debt payments to this figure:

- Total debt payments: $1290
- 20% threshold: $880

Since $1290 (total debt payments) is greater than $880 (20% of take-home pay), we can conclude Makayla would be at risk of credit overload.

Thus, the correct answer would be:

**B. yes, because the sum of $530 and $760 is greater than $880**