Debt to Income Ratio Calculator

Debt to Income Ratio – The Significance

debt-to-income-ratio

Debt to Income Ratio is an important parameter used by the lenders to judge your ability to serve the loan. Speaking precisely, DTIs often cover more than just debts; they can include certain taxes, fees, and insurance premiums as well. Based upon this lenders make sure that your monthly payments towards serving loans and debts does not exceed a certain percentage.

A debt to income ratio of about 36-38% is considered to be adequate to guarantee your ability to serve the loan. Please understand that this is just an indicative figure. The actual numbers vary from borrower to borrower and lender to lender.

How to Calculate Debt to Income Ratio

There are various components involved int he calculation of Debt to Income Ratio. You have to be careful to understand  them well. The thumb rule here is that the income considered is the Gross Income and not the Net Income.

Debt to Income Ratio Calculator

Here we present a simplified version of Debt to Income DIT Calculator. This calculator allows you to calculate your debt ratio or what percentage of your monthly income is used to pay fixed monthly costs.


Inputs Required to be Entered

Following inputs are required to be entered to run this Debt to Income Ratio Calculator.

  1. Gross Monthly Salary / Income: This is your normal monthly income. You should not deduct any taxes etc. but it should not include alimony, child support etc.
  2. Other Monthly Incomes: Other monthly income such as alimony or child support.
  3. Monthly Rent/Mortgage: This is the amount you have to shell out each month for rent or mortgage.
  4. Car Payments: The total amount you spend each month for all car payments.
  5. Credit Card Payments: The total amount you spend each month for all credit card payments.
  6. Other Loan Payments: The total amount you spend each month for all loans (not to include mortgage).
  7. Other Monthly Payments: Total of all other monthly obligations you have. (Examples are alimony, child support, legal judgment.)

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Output Results Calculated by Debt to Income Ratio Calculator

Following results will be given after calculations.

  1. Housing Debt Ratio: This is the calculated percentage of your monthly income that goes to pay for housing. If you find it to be anything lower than 28% then it is good enough.
  2. Total Debt Ratio: This is the calculated percentage of your monthly income that goes to pay all your debt (including housing). If you find it anything lower than 36-38%, then it is good enough.
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Disclaimer

Lots of approximations and assumptions have been made while developing the calculators.

Please make your own calculations before making any financial decision.