Debt to Income Ratio Calculator
What is a Debt to Income Ratio?
A debt to income ratio (or debt calculator) is a measure of financial leverage that indicates the proportion of debt an individual has in relation to their earnings. Debt to income ratios are often used by lenders when deciding whether or not to offer credit to individuals and businesses.
A debt to income ratio can be calculated for any type of debt, including mortgages, student loans, car loans, and credit card debt. It is used by lenders to measure an individual’s ability to make regular loan payments while maintaining other financial obligations. To optimize your ability to reduce debt look at a debt calculator with amortization.
Debt to Income Ratio Example:
For example, if you have a total monthly income of $5,000 and monthly debt payments of $3,000, your debt to income ratio is 60%.
The higher the amount of total monthly income compared to the sum of all monthly debts, the lower this figure will be. A low debt to income indicates that you have a low risk of default on your debts.