Debt/Income Definition - probably not what you are thinking....

[Mickey]

Been on prosper for a few years now. Have a portfolio of around $10K . One of the most important factors for me when choosing a loan is the debt to income ratio.

I just spoke with a Prosper CSR to better understand how it is calculated. Here is what I got:

* Ratio is pulled from the reporting agency.
* Agency may or may not include mortgage payment in the ratio calculation. In most cases it is not included.
* Student loan payments are excluded from the ratio.
* The full requested amount from Prosper Loan is already included (added) in the D/I calculation.

Now assuming this is true, it seems that this criteria is very weak to rely on when choosing a loan to invest in as most likely mortgage and student payments can easily have the largest payment amounts of a borrower.

Do you use this filter when it comes to loan selection? anyone has any different information from the one I got from Prosper CSR?

Would love to get your insight on this.

Thanks,

Mickey

[Randawl]

I use DTI as a factor in considering each loan as a part of the whole picture.  I generally don't use a hard line filter to exclude any particular DTI.

[Peter]

I was told a couple of years ago that DTI did not include mortgage payments so I have always assumed that to be the case. Like Randawl, DTI is only a secondary screen for me.

[Dennis]

* Student loan payments are excluded from the ratio.

This is something I've been wondering about for quite some time.   I'm a little ticked off if it's true, especially since there's no disclosure of that at either LC or Prosper.  Now I know why so many of my low DTI's have gone belly up. 

Given the prevalence of student loans in this country, I consider the lack of disclosure of them in DTI negligent.  I'm not at all happy about finding this out but thanks Mickey for bringing it to light.  I too had put a lot of weight on that number for loan selection.  I feel misled and cheated now.