Consumer leverage ratio

Consumer Leverage Ratio in the US

The consumer leverage ratio (CLR) is the ratio of total household debt to disposable personal income. The Federal Reserve separately reports household debt service payments as a percentage of disposable personal income. The Bureau of Economic Analysis publishes disposable personal income data.

${\mbox{Consumer leverage ratio}}={{\mbox{Total household debt}} \over {\mbox{Disposable personal income}}}$

The concept has been used to quantify the amount of debt an average consumer has, relative to their disposable income. In essence, the consumer leverage ratio demonstrates how many years it would take an average consumer to pay off their debt if their entire annual disposable income went toward it.