Enter the sum of all your monthly debt obligations (loans, credit cards, etc.)
Enter your total income before taxes and deductions
Your Debt Ratio will appear here.
Understanding Your Debt Ratio
The Debt Ratio, also known as the Debt-to-Income Ratio (DTI), is a crucial financial metric used by lenders to assess your ability to manage monthly payments and repay debts. It compares your total monthly debt payments to your gross monthly income.
Lower DTI is Better: A lower debt ratio generally indicates a lower risk for lenders and a healthier financial situation for you.
Common Benchmarks:
Below 36%: Generally considered good. You have manageable debt relative to your income.
36% to 43%: Acceptable for some lenders, but may indicate a higher risk.
Above 43%: Often considered too high by lenders, making it difficult to qualify for new loans or credit.
Why is Debt Ratio Important?
Loan Approval: Lenders heavily rely on DTI to determine if they will approve your mortgage, auto loan, personal loan, or credit card applications.
Financial Health Assessment: It provides a clear snapshot of how much of your income is already committed to debt, helping you understand your spending habits and financial freedom.
Budgeting and Planning: Knowing your DTI can help you set realistic financial goals, such as paying down debt or increasing your income to improve your borrowing capacity.
What to Include in Monthly Debt Payments:
Minimum credit card payments
Student loan payments
Auto loan payments
Personal loan payments
Mortgage or rent payments (often calculated differently for front-end vs back-end DTI, but for simplicity, we often include the mortgage PITI – Principal, Interest, Taxes, Insurance)
Any other recurring debt obligations.
What to Include in Gross Monthly Income:
Salary (before taxes)
Wages (before taxes)
Tips
Bonuses
Commissions
Alimony or child support received
Investment income (if regular and reliable)
Using this calculator can help you quickly assess your current debt-to-income situation and make informed financial decisions.
function calculateDebtRatio() {
var monthlyDebtsInput = document.getElementById("monthlyDebts");
var grossMonthlyIncomeInput = document.getElementById("grossMonthlyIncome");
var resultDiv = document.getElementById("result");
var monthlyDebts = parseFloat(monthlyDebtsInput.value);
var grossMonthlyIncome = parseFloat(grossMonthlyIncomeInput.value);
if (isNaN(monthlyDebts) || isNaN(grossMonthlyIncome)) {
resultDiv.innerHTML = "Please enter valid numbers for both fields.";
return;
}
if (grossMonthlyIncome <= 0) {
resultDiv.innerHTML = "Gross Monthly Income must be greater than zero.";
return;
}
if (monthlyDebts < 0) {
resultDiv.innerHTML = "Monthly Debt Payments cannot be negative.";
return;
}
var debtRatio = (monthlyDebts / grossMonthlyIncome) * 100;
// Format to two decimal places
var formattedDebtRatio = debtRatio.toFixed(2);
var interpretation = "";
if (debtRatio = 36 && debtRatio <= 43) {
interpretation = " Good. Your debt is manageable, but keep an eye on it.";
} else {
interpretation = " High. Consider strategies to reduce debt or increase income.";
}
resultDiv.innerHTML = "Your Debt Ratio is: " + formattedDebtRatio + "%" + interpretation;
}