The correct answer is: The individual would have to pay a large proportion of annual income for servicing the debt and is among the high-risk borrowers.
When banks evaluate an individual's debt-to-income ratio, they consider it as an indicator of their ability to repay loans. A high debt-to-income ratio indicates that a significant portion of the individual's income goes towards paying off debts, which can make it challenging for them to successfully manage additional financial obligations. This high ratio is seen as a higher risk for the bank as it suggests the individual may struggle to make loan payments or may be more susceptible to financial difficulties.
How do banks interpret an individual's high debt-to-income ratio?
The individual would have to pay a small proportion of annual income for the amount of debt he or she has and is among the low-risk borrowers.
The individual would have to pay a large proportion of annual income toward paying off the debt but is among the low-risk borrowers.
The individual would have to pay a large proportion of annual income for servicing the debt and is among the high-risk borrowers.
The individual would have a large amount of debt for the amount of savings he or she has but is among the low-risk borrowers.
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