{"id":747367,"date":"2018-09-17T00:50:49","date_gmt":"2018-09-17T04:50:49","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=747367"},"modified":"2026-03-09T18:35:17","modified_gmt":"2026-03-09T22:35:17","slug":"debt-to-income-ratio","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/personal-loans\/debt-to-income-ratio","title":{"rendered":"What you need to know about your debt-to-income ratio"},"content":{"rendered":"

Your credit score isn\u2019t the only thing you need to worry about when applying for a loan. Having a good debt-to-income ratio (DTI) is also key to qualifying for financing \u2014 and understanding it can set you on the path to getting a better interest rate or a more favourable loan term.<\/p>

Calculate your debt-to-income ratio for a loan<\/h3>

DTI ratio calculator<\/h3>

Calculate what percentage of your income is allotted to debt.<\/em><\/p>

Your monthly debt payments<\/th><\/tr><\/thead>
Credit card payments<\/th>Car loan payments<\/th><\/tr>
$<\/i>\/ mo<\/span><\/div><\/td>
$<\/i>\/ mo<\/span><\/div><\/td><\/tr>
Mortgage payments<\/th>Other loan payments<\/th><\/tr>
$<\/i>\/ mo<\/span><\/div><\/td>
$<\/i>\/ mo<\/span><\/div><\/td><\/tr>
Your monthly income<\/th><\/tr>
$<\/i><\/div><\/td><\/tr><\/tbody><\/table>
CALCULATE<\/a><\/div><\/div>

Fill out the form and click “Calculate” to see your DTI ratio.<\/strong><\/h4><\/div>

Your debt-to-income ratio is %<\/h3>
<\/div><\/div><\/div><\/div><\/div>

What is a debt-to-income ratio?<\/h3>

A debt-to-income ratio (DTI) is the amount of debt repayments you make each month divided by your income. Lenders use your DTI as one way to make sure you\u2019re in a position to afford your loan repayments.<\/p>

monthly debt \u00f7 monthly income = debt-to-income ratio<\/em><\/strong><\/p>

Typically, underwriters figure out your DTI themselves \u2014 however knowing your ratio before you apply can help you tell if it\u2019s a good time to apply for financing. If your score is too high, you might want to consider paying off some debt first in order to avoid high rates or getting rejected.<\/p>

Calculating your debt-to-income ratio<\/h3>

Calculating your DTI doesn\u2019t require complicated math once you understand what the terms debt and income cover<\/a>.<\/p>

Here\u2019s how to calculate your debt-to-income ratio:<\/p>

  1. Add up all of your monthly payments on existing debts.<\/li>
  2. Add up your monthly income before taxes and deductions (for many people, this is just a salary).<\/li>
  3. Divide your total monthly debt repayments by your total monthly income.<\/li>
  4. Turn that decimal into a percentage.<\/li><\/ol>

    Let\u2019s take a look at two examples.<\/p>

    1. Anita\u2019s a recent university graduate who wants to apply for a credit card to improve her credit score. She makes $48,000 a year before taxes as a full-time project manager at a local nonprofit. Her only debt is student loan repayments. Figuring out her DTI is pretty simple:<\/p>
    Total debt<\/th>$400 a month in student loan repayments<\/td><\/tr>
    Total income<\/th>$4,000 before taxes<\/td><\/tr>
    Debt-to-income ratio<\/th>400\/4,000 = 0.1 or 10%<\/td><\/tr><\/tbody><\/table>
    <\/div>

    2. Frank wants to apply for a personal loan to help cover the cost of his son\u2019s wedding, but his situation is a bit more complicated than Anita\u2019s. He\u2019s 66 years old, makes $75,000 a year and receives monthly CPP and OAS benefits. He also has a mortgage, a car loan and two credit cards that he pays off each month. Here\u2019s how Frank calculates his DTI:<\/p>
    Total debt<\/th>$599 mortgage repayment +
    $479 car loan repayment +
    $20 minimum credit card payment +
    $75 minimum credit card payment =
    $1,173<\/td><\/tr>
    Total income<\/th>$6,250 a month salary +
    $500 a month CPP and OAS =
    $6,750<\/td><\/tr>
    Debt-to-income ratio<\/th>$1,173\/$6,750 = 0.17377777 or about 17.38%<\/td><\/tr><\/tbody><\/table><\/div><\/div>

    What’s considered a good debt-to-income ratio?<\/h3>

    The lower the DTI, the better. More specifically, a DTI of 36% or below is generally considered good, while a DTI of 37-42% is considered manageable. A DTI of 43% or higher will likely mean you won’t qualify for a loan, as anything 43% or higher is considered cause for concern. A DTI of 50% or higher is considered dangerous.<\/p>

    Why 43%? Lenders came up with this number as a result of mortgage-risk studies that analyzed the type of borrowers who are most likely to have trouble making repayments \u2014 and ultimately default on their loans.<\/p>

    Your DTI is a factor lenders consider when determining the rates and terms of your loan. In general, you\u2019re more likely to get a better rate with a lower DTI.<\/p>

    Defining debt and income<\/h3>

    <\/a>To calculate your DTI, you first need to know what counts as debt and what counts as income.<\/p>