Debt-to-Income (DTI) Ratio Calculator | Financial Planning Tool

Managing your finances can feel overwhelming, especially when loans, credit cards, and monthly bills pile up. One of the most important numbers for financial planning and loan eligibility is your Debt-to-Income (DTI) Ratio. This ratio helps you understand how much of your income goes toward debt payments and whether you are financially healthy or overextended.

Why Debt-to-Income Ratio Matters

• Loan Approval: Lenders use DTI to evaluate whether you can afford additional loans or mortgages.
• Financial Health: High DTI indicates potential financial stress and difficulty saving.
• Budgeting: Helps you plan debt repayment and prioritize expenses.
• Interest Rates: Lower DTI can improve your chances of getting lower interest rates.

DTI Formula

The Debt-to-Income Ratio is calculated as:

DTI (%) = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

• Total Monthly Debt Payments: Include mortgages, loans, credit card minimum payments, and any recurring debt obligations.
• Gross Monthly Income: Your total income before taxes and deductions.

Step-by-Step Example: Calculating DTI

Problem: Your monthly debts are $1,200 (loan) + $300 (credit card) = $1,500. Your gross monthly income is $5,000. Find your DTI ratio.

Step 1: Add up all monthly debt payments: $1,200 + $300 = $1,500.
Step 2: Divide total debt by gross monthly income: 1,500 ÷ 5,000 = 0.3.
Step 3: Convert to percentage: 0.3 × 100 = 30%.

Interpretation: A DTI of 30% is generally considered healthy. Most lenders prefer DTI under 36%.

How the DTI Calculator Works

1. Enter all your monthly debt payments, including loans, credit cards, and other obligations.
2. Enter your gross monthly income.
3. The calculator automatically applies the formula: DTI = (Total Monthly Debt ÷ Gross Monthly Income) × 100.
4. Instantly get your DTI percentage along with an interpretation of your financial health.

Guidelines for DTI Ratios

• Below 36%: Healthy financial standing.
• 36% – 43%: Moderate risk, may qualify for loans but with higher scrutiny.
• Above 43%: High risk, lenders may deny loans or offer higher interest rates.

FAQs – Debt-to-Income Ratio Calculator

1. What is a good DTI ratio?
Ideally, keep your DTI below 36% to maintain financial stability.

2. Do all debts count in DTI?
Yes, include mortgages, car loans, student loans, and minimum credit card payments.

3. Does DTI include taxes?
No, DTI is based on gross income before taxes.

4. Can DTI affect my mortgage approval?
Yes, lenders heavily rely on DTI to assess loan eligibility.

5. How can I lower my DTI?
Increase income or pay down existing debts to improve your ratio.

6. Is DTI different from credit score?
Yes, DTI measures debt load relative to income, while credit score evaluates payment history and creditworthiness.

7. Can I use this calculator for annual income?
Yes, divide annual income by 12 to find gross monthly income for the formula.

8. What if my DTI is over 50%?
This indicates high financial stress, and it may be challenging to get approved for new loans.

9. Does this calculator consider variable income?
You can input average income if it varies monthly, for an accurate ratio.

10. Is this calculator free?
Yes, it is completely free and works instantly in your browser.