function calculateDebtRates() {
// Get input values
var income = parseFloat(document.getElementById('monthlyGrossIncome').value);
var monthlyDebt = parseFloat(document.getElementById('monthlyDebtPayments').value);
var liabilities = parseFloat(document.getElementById('totalLiabilities').value);
var assets = parseFloat(document.getElementById('totalAssets').value);
// Validation flags
var validCashFlow = (!isNaN(income) && !isNaN(monthlyDebt) && income > 0);
var validBalanceSheet = (!isNaN(liabilities) && !isNaN(assets) && assets > 0);
if (!validCashFlow && !validBalanceSheet) {
alert("Please enter valid positive numbers for Income and Assets to calculate rates.");
return;
}
// 1. Calculate Debt-to-Income (DTI)
var dti = 0;
var dtiText = "N/A";
var dtiClass = "status-warning";
var dtiStatusText = "Unknown";
if (validCashFlow) {
dti = (monthlyDebt / income) * 100;
dtiText = dti.toFixed(2) + "%";
if (dti <= 35) {
dtiClass = "status-good";
dtiStatusText = "Healthy";
} else if (dti <= 49) {
dtiClass = "status-warning";
dtiStatusText = "Manageable";
} else {
dtiClass = "status-danger";
dtiStatusText = "High Risk";
}
}
// 2. Calculate Debt-to-Asset (Solvency)
var solvency = 0;
var solvencyText = "N/A";
var solvencyClass = "status-warning";
var solvencyStatusText = "Unknown";
if (validBalanceSheet) {
solvency = (liabilities / assets) * 100;
solvencyText = solvency.toFixed(2) + "%";
if (solvency <= 40) {
solvencyClass = "status-good";
solvencyStatusText = "Strong";
} else if (solvency <= 60) {
solvencyClass = "status-warning";
solvencyStatusText = "Leveraged";
} else {
solvencyClass = "status-danger";
solvencyStatusText = "Insolvent Risk";
}
}
// 3. Calculate Disposable Income
var disposable = "N/A";
if (validCashFlow) {
var diff = income – monthlyDebt;
disposable = "$" + diff.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}
// Update DOM
var resultBox = document.getElementById('rdResult');
resultBox.style.display = 'block';
// Update DTI
document.getElementById('dtiResult').innerText = dtiText;
var dtiStatusEl = document.getElementById('dtiStatus');
dtiStatusEl.className = "rd-status " + dtiClass;
dtiStatusEl.innerText = dtiStatusText;
// Update Solvency
document.getElementById('solvencyResult').innerText = solvencyText;
var solvencyStatusEl = document.getElementById('solvencyStatus');
solvencyStatusEl.className = "rd-status " + solvencyClass;
solvencyStatusEl.innerText = solvencyStatusText;
// Update Disposable
document.getElementById('disposableResult').innerText = disposable;
}
How to Calculate Rate of Debt: Understanding Your Financial Ratios
Calculating your "rate of debt" is not about finding a single interest rate, but rather understanding the proportion of debt you carry relative to your financial means. In financial analysis, this is done through two primary formulas: the Debt-to-Income Ratio (DTI) and the Debt-to-Asset Ratio.
These metrics act as a thermometer for your financial health, telling lenders and financial planners whether you are solvent (able to pay debts) or highly leveraged (at risk of default).
1. The Debt-to-Income (DTI) Formula
The DTI ratio measures the rate at which your monthly gross income is consumed by debt obligations. It is the primary metric used by mortgage lenders to determine creditworthiness.
Total Monthly Debt Payments: This includes rent or mortgage payments, HOA fees, student loans, auto loans, credit card minimums, and child support. It does not include utilities or food.
Gross Monthly Income: Your income before taxes and deductions.
Interpretation:
Below 35%: Excellent. You have significant disposable income.
36% to 49%: Moderate. You are eligible for most loans but have less flexibility.
50% and above: High Risk. You may struggle to obtain new credit or absorb financial shocks.
2. The Debt-to-Asset Ratio (Solvency)
While DTI looks at cash flow, the Debt-to-Asset ratio looks at your total net worth structure. It calculates the percentage of your total assets that are financed by creditors.
Debt-to-Asset Rate = (Total Liabilities / Total Assets) × 100
Components:
Total Liabilities: The total payoff amount of all your debts (mortgage balance, loan balances, credit card balances).
Total Assets: The fair market value of everything you own (home value, savings, investments, vehicles).
A ratio greater than 100% indicates "insolvency," meaning you owe more than you own. A ratio below 50% generally indicates a strong equity position.
Why These Rates Matter
Understanding how to calculate the rate of debt allows you to proactively manage your leverage. If your DTI is rising, it implies your income isn't keeping pace with your spending. If your Debt-to-Asset ratio is rising, it means your assets may be depreciating or your borrowing is eroding your net worth.
Use the calculator above to regularly check these metrics, especially before applying for major financing like a home mortgage or business loan.