Debt-to-Income Ratio Formula
Calculate your debt-to-income ratio with DTI = (Monthly Debt / Monthly Income) × 100.
Understand your financial health for loan approvals.
The Formula
The debt-to-income ratio measures how much of your monthly income goes toward paying debts. Lenders use this ratio to determine whether you can afford to take on additional debt.
Variables
| Symbol | Meaning |
|---|---|
| DTI | Debt-to-income ratio (as a percentage) |
| Total Monthly Debt | Sum of all monthly debt payments (mortgage, car loan, credit cards, student loans) |
| Gross Monthly Income | Total monthly income before taxes and deductions |
Example 1
Your monthly debts total $1,800 and your gross monthly income is $5,500.
Monthly Debt = $1,800, Monthly Income = $5,500
DTI = (1800 / 5500) × 100
DTI = 0.3273 × 100
DTI = 32.7% — This is within the acceptable range for most lenders (under 36%).
Example 2
You earn $8,000 per month. You pay $1,200 for rent, $450 for car loan, and $350 for student loans.
Monthly Debt = $1,200 + $450 + $350 = $2,000
DTI = (2000 / 8000) × 100
DTI = 0.25 × 100
DTI = 25% — This is a healthy ratio, and most lenders would view this favorably.
When to Use It
Use the debt-to-income ratio when:
- Applying for a mortgage or personal loan
- Assessing your overall financial health
- Deciding whether you can afford to take on new debt
- Creating a plan to reduce your debt burden