Debt to income ratio calculator
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Partners on this page may provide us earnings.
Your debt-to-income (DTI) ratio plays a significant role in assessing your financial well-being. By calculating your DTI, you can gauge your comfort level with existing debt and make informed decisions about pursuing additional credit. As well, lenders rely on your DTI when evaluating credit applications to assess the potential risk of extending further credit to you.
To calculate your debt-to-income ratio, you need to sum up all your monthly debt payments and divide that total by your gross monthly income. Your gross monthly income refers to the amount of money you earn before any taxes or deductions are withheld. To make it easy for you, you can use our helpful debt-to-income ratio calculator.
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Here are the guidelines for reading debt-to-income ratios results:
Lenders are generally hesitant to provide loans to individuals who are burdened with substantial debt. A high debt-to-income (DTI) ratio may lead lenders to believe that the borrower may struggle to meet their monthly payment obligations for a new loan. In Canada, lenders typically prefer borrowers with a DTI ratio that does not exceed 42%.
If you’re looking for ways to reduce your DTI score, here are seven tips to try:
Explore opportunities to increase your income and improve your financial situation, such as starting a side hustle.
Maintaining a manageable level of debt is crucial for maintaining good financial health. However, it's important to recognize the signs that your debt may be becoming unmanageable. You don’t want to find yourself unable to meet your monthly payments or experience a decline in your credit score. Thankfully, using a debt-to-income ratio calculator to determine your DTI is best if you’re worried about accumulating an excessive amount of debt.
Amy Tokic is an SEO content editor for Money.ca. She holds a B.A. in Communications from the University of Windsor. Amy is an award-winning author and has been writing professionally for 15 years, publishing articles in the lifestyle and health sectors. In her free time, Amy loves perusing used book and record stores, and chasing squirrels with wild abandon (a habit attributed to spending too much time with her pooches).
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