1. What is Debt Payment Ratio?

The Debt Payment Ratio (DPR) measures the percentage of disposable income that goes towards debt payments. It's a key indicator of financial health and debt affordability.

2. How Does the Calculator Work?

The calculator uses the DPR formula:

Where:

• \( \text{Debt Payments} \) — Monthly debt obligations ($)
• \( \text{Disposable Income} \) — Monthly income after taxes ($)

Explanation: The ratio shows what portion of income is committed to debt repayment each month.

3. Importance of DPR Calculation

Details: Lenders use DPR to assess loan applications. A lower ratio indicates better financial flexibility, while higher ratios may signal financial stress.

4. Using the Calculator

Tips: Enter total monthly debt payments and disposable income in the same currency. Include all recurring debt obligations (mortgage, loans, credit cards).

5. Frequently Asked Questions (FAQ)

Q1: What is a good Debt Payment Ratio?
A: Generally, below 35% is considered manageable, 36-49% may be concerning, and 50%+ indicates high debt burden.

Q2: How does DPR differ from debt-to-income ratio?
A: DPR focuses on disposable income (after taxes), while DTI uses gross income. DPR gives a more accurate picture of actual financial flexibility.

Q3: Should I include utilities in debt payments?
A: No, only include contractual debt obligations like loans, credit card minimums, and mortgage/rent payments.

Q4: How often should I calculate my DPR?
A: Monitor it quarterly or whenever your income or debt situation changes significantly.

Q5: Can DPR be too low?
A: Extremely low DPR might indicate underutilization of credit, but generally lower is better for financial health.