1. What is Debt To Income Percentage?

The Debt To Income (DTI) ratio is a personal finance measure that compares an individual's monthly debt payments to their monthly gross income. It's expressed as a percentage and is used by lenders to assess a borrower's ability to manage monthly payments and repay debts.

2. How Does the Calculator Work?

The calculator uses the DTI formula:

Where:

• \( Debt \) — Total monthly debt payments
• \( Income \) — Total monthly gross income

Explanation: The equation calculates what percentage of your monthly income goes toward debt payments.

3. Importance of DTI Calculation

Details: Lenders use DTI to evaluate creditworthiness. A lower DTI shows better balance between debt and income. Most lenders prefer DTI below 36%, with no more than 28% going toward housing expenses.

4. Using the Calculator

Tips: Enter your total monthly debt payments (mortgage/rent, car loans, credit cards, etc.) and your total monthly gross income (before taxes). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DTI ratio?
A: Generally, 35% or lower is considered good, 36%-49% is acceptable but may need improvement, and 50% or higher indicates significant debt burden.

Q2: How is DTI different from credit utilization?
A: DTI looks at all debt payments relative to income, while credit utilization focuses specifically on credit card balances relative to credit limits.

Q3: Should I include taxes in my income calculation?
A: No, use gross income (before taxes) as this is the standard for DTI calculations.

Q4: What debts should I include?
A: Include all recurring monthly debt payments: mortgage/rent, car loans, student loans, credit card minimum payments, personal loans, etc.

Q5: Can I improve my DTI?
A: Yes, by increasing income, paying down debts, or a combination of both. Avoid taking on new debt while improving your ratio.