Debt-to-Income Ratio (DTI) Calculator

What is a DTI Ratio?

A DTI ratio, known as a Debt to Income ratio is the fraction of your gross monthly income that pays for your monthly debts. When calculating a DTI ratio, you use your gross income. This is your income without any tax deductions made. A DTI ratio allows lenders to gauge your ability to repay a loan, and how well you can manage it given everything else you have to pay for from your income.

Lenders identify individuals with a small DTI ratio as customers who are less risky. This is because such individuals have a smaller likelihood to run into financial problems that may to a default.

It’s pretty straight forward to calculate your DTI ratio. You start by summing up all monthly debts you are obligated to pay. You then calculate the ratio of this number and the income you receive monthly. Finally, multiply this number by 100, and this is your DTI.

How to Use the Debt to Income Calculator?

Using our Debt to Income calculator is pretty easy. You need to follow the following steps and you’re all good.

1. Enter Your Gross Monthly Income
   This is the income you receive every month before any tax deductions are made.
2. Enter Your Minimum Credit Card Payment
   By the due date of your credit card bill every month, you are at least required to make the minimum payment to your bank. This is the least amount you are eligible to pay through your credit card to circumvent running into problems and penalties at a later time. You can find this amount on your billing statement or on your online account when you log in.
3. Enter Your Auto Loans
   Enter the monthly loan you pay for any vehicles you have leased or loaned.
4. Enter Miscellaneous Loans
   For any miscellaneous loans you are obligated to pay every month, enter the sum of the monthly amount of these loans in the last field. These can include any personal loans you’ve taken.

What is the Best Debt to Income Ratio?

A Debt to Income ratio is preferred to be a small figure. However, an ideal figure would require an understanding of front-end DTI as well as back end DTI.

Front End DTI Ratio
This is the monthly amount you set aside for mortgages, home insurance, homeowners fee, property tax and other housing expenses. A preferred front-end DTI ratio would be below 28%.

Back End DTI Ratio
This includes the expenses pertinent to your housing such as mortgages and property taxes added to your car loans, personal loans and other debts you are obligated to pay.

How to Lower Income to Debt Ratio?

As said earlier, it is desirable to a have a low DTI ratio. Here are some of the ways you can have a lower ratio.

1. Track your spending on an excel sheet or in a notebook. Cut down anything that seems unnecessary.
2. Create a plan for your expenses and try not to deviate from it.
3. Pay up debts with higher interest before moving on to lower interest debts.
4. Try to lower your debt interest rates wherever possible. Talk to your bank for your credit card interest rate.
5. Avoid signing up for any other debts that aren’t required just yet.