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Calculate what percentage of your income is allotted to debt.
|Your monthly debt payments|
|Credit card payments||Car loan payments|
|Mortgage payments||Other loan payments|
|Your monthly income|
Follow the instructions below to calculate your DTI ratio:
The DTI ratio formula doesn’t require fancy math — it’s simply your debt divided by your income.
Here’s how to calculate your debt-to-income ratio by hand:
Let’s take a look at two examples:
Anita’s a recent college graduate who wants to apply for a credit card to improve her credit score. She makes $48,000 a year before taxes. Her only debt is student loan repayments. Figuring out her DTI is pretty simple:
|Total monthly debt||$400 student loan repayment|
|Total monthly income||$4,000 salary|
|Debt-to-income ratio||400/4000 = 0.1 or 10%|
Frank wants to apply for a personal loan to help cover the cost of his son’s wedding. He makes $75,000 a year and receives monthly Social Security benefits. He also has a mortgage, car loan and two credit cards that he makes payments on each month. Here’s how Frank calculates his DTI:
|Total monthly debt||$599 mortgage repayment +|
$479 car loan repayment +
$20 minimum credit card payment +
$75 minimum credit card payment =
|Total monthly income||$6,250 salary +|
$500 Social Security =
|Debt-to-income ratio||1173/6750 = 0.1738 or 17.38%|
While your debt-to-income ratio doesn’t directly affect your credit score, it plays a major role in your overall financial health. Both your DTI ratio and credit score help lenders determine your ability to pay back a loan or credit card. It’s not uncommon to get denied for a credit card or loan — despite having good credit — because your debt-to-income ratio is too high.
Finder’s DTI calculator can help you decide next steps when it comes to applying for a mortgage or debt consolidation loan. And if your debt-to-income ratio is too high, it can also help you determine whether you should pursue other debt relief options first.
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