kayode10
VIP Contributor
Debt to income ratio (DTI) is a financial metric used by companies and government bodies to assess an individual's financial stability. It's calculated by dividing the total amount of monthly debt obligations by the gross monthly income.
In a simple term, DTI is expressed as a percentage, and the higher the percentage, the higher the debt burden relative to income.
These are the step by steps to calculate DTI:
Gather all your monthly debt obligations: this is the first thing you need to do and this includes mortgage or rent payments, credit card payments, auto loans, student loans, and any other recurring debt together with some other house expenses.
Add up the monthly debt payments: Sum up all the monthly debt payments you listed in step 1 as indicated.
Determine your gross monthly income: This is the amount of money you earn before taxes and other deductions, your statement of account will be offered in this aspect. You can obtain thisobtained from your pay stubs or by multiplying your annual income by 12 and then dividing by 12.
Divide the monthly debt by gross monthly income: the next step is to take the sum of your monthly debt payments from step 2 and divide it by your gross monthly income from step 3.
Then you multiply by 100 to get the percentage: Multiply the result of step 4 by 100 to convert it into a percentage. There are some applications you can use on your smartphone to do this easily
The resulting number is your DTI. A DTI of 36% or less is considered healthy, but this can vary depending on the lender and the type of loan you're applying for.
A high DTI can make it difficult to qualify for a loan, so it's important to keep your DTI as low as possible and there are many ways to go about it. If your DTI is high, consider paying off debt, increasing your income, or both, to improve your financial stability and lastly take control of your finance.
In a simple term, DTI is expressed as a percentage, and the higher the percentage, the higher the debt burden relative to income.
These are the step by steps to calculate DTI:
Gather all your monthly debt obligations: this is the first thing you need to do and this includes mortgage or rent payments, credit card payments, auto loans, student loans, and any other recurring debt together with some other house expenses.
Add up the monthly debt payments: Sum up all the monthly debt payments you listed in step 1 as indicated.
Determine your gross monthly income: This is the amount of money you earn before taxes and other deductions, your statement of account will be offered in this aspect. You can obtain thisobtained from your pay stubs or by multiplying your annual income by 12 and then dividing by 12.
Divide the monthly debt by gross monthly income: the next step is to take the sum of your monthly debt payments from step 2 and divide it by your gross monthly income from step 3.
Then you multiply by 100 to get the percentage: Multiply the result of step 4 by 100 to convert it into a percentage. There are some applications you can use on your smartphone to do this easily
The resulting number is your DTI. A DTI of 36% or less is considered healthy, but this can vary depending on the lender and the type of loan you're applying for.
A high DTI can make it difficult to qualify for a loan, so it's important to keep your DTI as low as possible and there are many ways to go about it. If your DTI is high, consider paying off debt, increasing your income, or both, to improve your financial stability and lastly take control of your finance.
