Debt-to-Income Ratio Calculator

What this calculator tells you

Your debt-to-income ratio, often shortened to DTI, compares what you pay each month on debts with the income you earn before tax. Lenders use it to judge whether you can take on more borrowing. It is also a useful personal measure of how much of your income is already committed to repayments.

The ratio is a simple percentage, but its meaning depends on which debts are counted and which income is used. This calculator uses monthly debt payments and gross monthly income, which is the standard basis for most lending decisions.

How the ratio is worked out

Add up the required monthly payments on your debts, such as loans, credit card minimums, and other fixed commitments. Divide that total by your gross monthly income, which is income before tax and deductions, and multiply by 100 to get a percentage. Regular living costs, such as food and utilities, are not normally counted in this ratio.

A worked example

Suppose your required debt payments total 1,200 a month and your gross monthly income is 4,000. Dividing 1,200 by 4,000 gives 0.30, so your debt-to-income ratio is 30%. This means 30 cents of every gross pound, dollar or unit of income is committed to debt repayments before any other spending.

What lenders look at

Lenders set their own limits, and the figure they accept varies by type of loan, by country and by the rest of your application, such as your credit history and savings. A lower ratio generally makes approval more likely and can lead to better terms. Some lenders look at a second measure that includes your expected housing costs, so the ratio on its own does not decide the outcome.

Limits of the calculation

The ratio uses the payments you are required to make, not the full balances, and it uses gross income, which is higher than the money you actually take home. Income that is variable, such as commission or self-employed earnings, is hard to measure reliably, and lenders may average it over several years. The ratio does not show how much you have saved, and a person with a moderate ratio and little savings may still be under pressure.

Debts that are paid off in a few months may be treated differently from long-term commitments. Check how a lender treats each debt, because the result depends on what is included.

Using the ratio over time

A single ratio is a snapshot. Recalculate it each time a loan is repaid, a new debt is taken on, or income changes. A falling ratio over several years shows that your finances are becoming more resilient, while a rising one is an early signal to slow new borrowing and build savings.

Compare the ratio with your savings rate as well. A household with a moderate ratio but a very low savings rate may have less room for surprises than a household with a higher ratio that is paying down debt quickly and building reserves.

Using the result

Use the ratio to see how much room you have before taking on a new loan. If the figure is high, reducing a debt, increasing income or delaying a new commitment can lower it. Pay attention to the monthly amount as well as the percentage, because the pounds or dollars left after debts are paid determine how much you can actually spend on everything else.