What Is the Debt-to-Income Ratio (DTI)?
The Debt-to-Income Ratio (DTI) is a measure of how much of your monthly income goes toward debt payments. It’s a valuable figure that lenders often review to assess your financial health before approving credit applications. By calculating your DTI, you can understand your debt load and see how comfortable you are financially.
Why Use a Debt-to-Income Ratio Calculator?
Calculating your DTI manually can be tricky, especially if you have multiple sources of income or several debt obligations. Our calculator makes it easy to find your Debt-to-Income Ratio and Debt-to-Net-Income Ratio with just a few inputs, helping you understand your financial profile and plan accordingly.
How to Use the Debt-to-Income Ratio Calculator
Using this calculator is simple. Enter your monthly debt payments and monthly gross income to get your DTI. To get your Debt-to-Net-Income Ratio, just add your monthly net income as well:
- Monthly Debt Payments: This includes loans, credit card payments, and other recurring debts.
- Monthly Gross Income: Your total monthly income before taxes and deductions.
- Monthly Net Income (for Debt-to-Net-Income Ratio): Your monthly income after all deductions.
Understanding Your Debt-to-Income Ratio
- Low DTI (Below 36%): Generally considered safe, meaning your debt load is manageable.
- Moderate DTI (36% – 49%): Indicates some risk; lenders may be cautious about extending further credit.
- High DTI (50% or Above): Suggests a heavy debt load; managing existing debt before taking on more is recommended.
Benefits of Knowing Your DTI and Debt-to-Net-Income Ratios
- Financial Planning: Understanding your DTI helps you plan for debt repayment and budget effectively.
- Improving Creditworthiness: Lowering your DTI can improve your chances of getting approved for loans and credit at favorable rates.
- Managing Debt: Knowing your Debt-to-Net-Income Ratio gives you insight into how much take-home pay goes to debt, allowing for more precise budgeting.