Debt-to-Income Ratio Calculator
Calculate your Debt-to-Income (DTI) ratio to determine how much of your income goes towards debt obligations.
What is Debt-to-Income Ratio (DTI)?
The Debt-to-Income Ratio (DTI) is a financial metric used by lenders to evaluate your ability to manage monthly payments and repay debts. It compares your total monthly debt obligations to your gross monthly income. A lower DTI ratio suggests better financial health and increases your chances of loan approval.
How to Calculate DTI
The formula for DTI is straightforward: DTI = (Total Monthly Debt Payments / Gross Monthly Income) × 100. For example, if you earn $5000/month and your debts total $1500/month, your DTI is 30%.
Why Does DTI Matter?
Lenders use your DTI to determine whether you can handle additional debt. Mortgage lenders, in particular, look for DTI ratios below 36%, with no more than 28% of that debt going toward housing expenses. High DTI ratios may result in loan denial or higher interest rates.
Ideal DTI Ratio
- Less than 36%: Excellent
- 36% – 43%: Acceptable for most loans
- Above 43%: Risky – loan approval becomes difficult
Improve Your DTI
To improve your DTI ratio, consider paying down existing debts, avoiding new credit obligations, increasing your income through side gigs or promotions, and budgeting to reduce unnecessary expenses.
Use This Tool for:
- Mortgage loan eligibility
- Auto financing
- Credit card assessments
- Personal budgeting and planning
This calculator is designed to provide a clear and fast way to assess your DTI and make informed financial decisions. Bookmark this tool and use it regularly to monitor your debt load!
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