How DTI is calculated, what lenders look for and how to improve yours before applying.
The definition
Debt-to-income ratio, or DTI, compares your monthly debt payments with your gross monthly income. It tells lenders how much of your income is already committed.
The formula
Add your monthly debt payments, divide by gross monthly income and multiply by 100. With $5,000 income and $1,200 of debts, DTI is 24%. A new $400 payment lifts it to 32%.
What lenders look for
Many lenders prefer ratios around 36% or lower, though limits vary by lender, loan type and country. A lower ratio signals more room to repay.
How to improve it
Pay down balances, especially cards, avoid taking on new debt before applying and increase income where possible.
Beyond DTI
Lenders also review credit history, employment and savings. A strong ratio does not guarantee approval.
Check yours
The debt-to-income calculator shows your ratio before and after a new loan.
General information only, not financial, credit or legal advice. We do not offer or arrange loans. Rules and rates differ by country and lender.