Quiz 2.4.2 – Know the Limit

The 20–10 Rule for Borrowing Limit

$ Total ofShould Be LESS Thanof Your
Amount Borrowed*20%Annual Net Income
Monthly Payments10%Monthly Net Income
*Includes credit cards but not mortgages


  1. Use the 20-10 Rule to calculate the debt limits for Mariah’s and Jesse’s older siblings.
  • If you earn any income now, also compute your debt limits.
    Borrower  Annual Net IncomeMaximum Total Debt (20% Annual Net Income)Maximum Monthly Payments (10% Monthly Net Income)
  Mariah’s sister  $6,500   
  Jesse’s brother  $24,750  
  Jesse’s sister  $35,800