Debt-to-income ratio (DTI) divides your total monthly debt payments by your gross monthly income. It's usually expressed as a percentage.
Lenders factor in your DTI when considering whether to approve your loan application. Having a debt-to-income ratio under 40% is ideal when shopping for personal loans, but some lenders accept ratios up to 70% or higher.
Here’s how to calculate your DTI and how it affects the loan approval process.
How to use this DTI calculator
To calculate your DTI, first enter the debt payments you owe each month, such as your mortgage, student loan, auto loan and credit card minimums. Then, adjust the slider to match your gross monthly income (total income before taxes and other deductions).
Hit the “calculate” button, and you’ll get your debt-to-income ratio expressed as a percentage.
What to include when calculating your DTI ratio
Debt payments to include
To get the most accurate DTI ratio, include any debts you’re obligated to repay, including:
Mortgage or rent* payments.
Auto loan payments.
Student loan payments.
Minimum credit card payments.
Personal loan payments, including co-signed loans.
Other debt payments, such as medical debt, tax debt or the minimum payment on a home equity line of credit.
Court-ordered payments, such as child support or alimony.
*Though rent is not typically viewed as debt, some lenders include rent payments in DTI calculations.
Expenses to exclude
Don’t include variable expenses, such as:
Groceries.
Gas.
Utility payments.
Phone bills.
Health insurance.
Auto insurance.
Child care payments.
Recreational spending.
What counts as income?
Include regular sources of income, such as:
Salary from full-time work.
Part-time wages.
Freelance or self-employment income.
Child support or alimony received.
Social Security benefits.
Rental property income.
Don’t include money from a gift, inheritance, prize or other one-time events.
How to manually calculate your debt-to-income ratio
To manually calculate DTI, divide your total monthly debt payments by your monthly income before taxes and deductions are taken out. Multiply that number by 100 to get your DTI expressed as a percentage.
The DTI formula is:
Total monthly debt/total gross monthly income x 100 = DTI%
Here’s an example: Suppose you have a gross monthly income of $6,000 and the following monthly debt payments:
$1,800 mortgage.
$300 car payment.
$240 minimum credit card payment.
In this example, $2,340 is the sum of all debt payments. You’d calculate your DTI ratio as follows:
Divide $2,340 by $6,000, which equals 0.39.
Multiply 0.39 by 100, which equals a 39% DTI.
What’s a good DTI ratio?
How personal loan lenders view your DTI ratio
Your DTI ratio is one of the top factors lenders consider when you apply for a personal loan, along with your credit score and credit history. Having a high debt-to-income ratio may cause lenders to be concerned that you'd have trouble making consistent payments.
A high DTI could prevent you from qualifying from a loan. Or you may need to settle for a smaller loan amount than you originally wanted.
We surveyed several top-rated personal loan lenders. Here are the maximum DTI ratios they accept, plus the DTI ratios their average borrowers tend to have. You’ll notice the average borrower’s DTI is typically below the maximum that lenders allow.
Lender | Maximum DTI allowed | Average borrower’s DTI range |
|---|---|---|
70%, including mortgage. | 31% to 50%. | |
80%, excluding housing. | 30% or less. | |
40%. | 30% or less. | |
55%, including housing. | 31% to 50%. | |
50%, excluding mortgage. | 31% to 50%. | |
40%, excluding mortgage; 70% including mortgage. | 30% or less. | |
75%, including housing. | 31% to 50%. | |
60%. | Not disclosed. |
Ways to lower your DTI ratio
Reduce your debt-to-income ratio to improve your chances of qualifying for future loans.
Increase your income. Make more money with a side gig, like babysitting or dog walking. In order to factor it into your DTI ratio, the income ought to be consistent, not something you do for fast cash occasionally. Getting a raise or a better-paying job may require more effort but would also lower your DTI.
Reduce your debt. Paying down your credit card balance can reduce your minimum monthly payments. Your DTI will also go down if you pay off installment loans, like a student loan or car loan. To reduce your debt, try the debt snowball or debt avalanche payoff methods.
Refinance or consolidate debt. Refinancing or consolidating debt at a lower interest rate could lower your monthly payments and therefore reduce your DTI. Negotiating a longer repayment term could also lower your monthly debt payments, though you may wind up paying more interest over time.
Avoid taking on additional debt. Don’t add to your credit card balance or take out additional loans if you want to lower your DTI.
Does DTI affect your credit score?
Your debt-to-income ratio does not affect your credit score. Credit reports don’t include income, so income isn’t used to calculate your credit score.
However, the amount of debt you have can affect your credit score. More specifically, your credit utilization — the amount of revolving debt you have compared to your credit limits — has a significant impact on your credit score.
For a favorable credit utilization, try keeping the balances on your credit cards, or other revolving credit lines, no higher than 30% of your credit limit.
