Debt-to-Income Ratio
Debt-to-income ratio (DTI) is one of the most common numbers lenders and debt relief programs use to gauge whether your monthly debt load is manageable relative to what you earn.
What DTI Is and How It's Calculated
DTI is calculated as: total monthly debt payments ÷ gross monthly income. For example, $1,500 in monthly debt payments against $5,000 in gross monthly income is a 30% DTI.
In plain terms: if 30 cents of every dollar you earn before taxes is already spoken for by debt payments, that's your DTI. The lower that number, the more breathing room a lender assumes you have.
Why Lenders and Debt Relief Programs Care About It
A high DTI tells a lender you have less room in your monthly budget to absorb a new payment or handle a surprise expense. Some debt consolidation lenders use DTI as a qualifying factor, see our Debt Consolidation Requirements page for how this plays out in practice.
Is There a "Good" DTI?
There is no single number that works for everyone. Each lender sets its own limits, and they change by loan type. A mortgage lender, a car lender, and a personal loan lender may all look at the same DTI and decide different things.
A simple way to think about it: the more cents of each dollar go to debt, the less room you have for rent, food, and surprises. If you ask a lender, ask what limit they use for the exact loan you want.
Why DTI Matters Even If You Are Not Applying for a Loan
A high DTI is a sign of money strain. If most of your pay goes to debt before you buy food or pay rent, a budget alone may not fix it. That can be a sign to look at a plan built for your debt.
How to Lower Your DTI
- Pay down balances so your monthly payments shrink.
- Bring in more income if you can.
- Combine high payments into one lower payment with a debt consolidation loan, if the new payment is really lower.
- If the payments are too big for your income, look at debt relief options or take the free debt assessment.
Want to calculate your own DTI? Try our DTI Calculator →