How to Calculate Your Debt-To-Income Ratio

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If you’re working on paying off your debt, you know that there are a lot of factors to consider when creating a repayment plan: how many credit accounts you have, what your interest rates are, when your payments are due each month, and so on.


But for many consumers, their debt-to-income (DTI) ratio is a helpful—but often overlooked—tool for measuring their own ability to repay their debts successfully. Knowing your DTI can give you insight as to how long it might take you to repay your debts and whether you can afford to take on more debt.


While it’s helpful for you as a borrower to know what your DTI is, it’s also a tool that lenders use to determine your likelihood of being able to repay your debts each month. That is, your DTI is as important to your own budgeting and debt repayment plan as it is to any potential lenders you’ll borrow from in the future.


What is a debt-to-income ratio?


Your DTI ratio is exactly what it sounds like: the amount you owe each month compared to the amount you make. DTI ratios are percentages that represent your gross (pre-tax) monthly income divided by the total amount of debt you owe each month.


Calculating your debt-to-income ratio


a calculator and pen sit next to a list of someone's expenses, including rent, utilities, and groceries

To calculate your DTI ratio, first add up your total monthly debt. That total debt includes any fixed monthly expenses, such as:


  • Mortgage payments or rent
  • Car payments
  • Insurance premiums
  • Student loan payments
  • Credit card minimum monthly payments

Monthly expenses that vary, like groceries, utilities, and so on, should not be included in your total debt calculation.


Once you add up your total monthly debts, find the pre-tax amount of income on your paychecks. If you get paid twice a month, multiply that number by two to get your monthly income. Make sure to also include monthly income from Social Security, alimony, child support, and tips.


Then, divide your monthly debt amount by your gross monthly income. The figure you’ll get will have a decimal point, so move the decimal point two digits to the right to create a percentage.


Your monthly debts
Pre-tax income
= DTI ratio


And that’s it—now you know your DTI ratio!


Related Article: A Guide to Everything You Want to Know About Credit


What is a good debt-to-income ratio?


Knowing your DTI ratio is one thing—but knowing what it means to lenders is another. Now that you have your DTI ratio calculated, where do you stand?


35% or less


If you fall at 35% or less, you’re in good shape! Not only do you have money left over each month for savings each month, but also, lenders are more likely to look at you as a good candidate for a loan. Great job!


36% to 49%


Your DTI won’t necessarily be a dealbreaker, but you definitely have room for improvement. You’re staying afloat and can pay off your debts, but you might not have a lot of money left over for emergency expenses and saving.


Nevertheless, you’re not in bad shape—but you may want to consider making a few financial changes to improve your DTI ratio.


49% or higher


If your DTI is over 49%, your finances are strained—but you don’t need us to tell you that. Lenders may not offer you favorable rates for loans, and you may be struggling to save money and pay for emergency expenses.


Related Article: Bankruptcy: A Complete Guide


What can I do if I have a high debt-to-income ratio?


If your DTI is anything less than good, then you may want to start thinking seriously about ways to lower that percentage. This could look like a lot of things: spending less on flexible expenses, taking on a second job, moving in with a roommate, and so on. But what if you’re already doing everything you can to stay afloat?


You may have another option: consolidating your debts using a personal loan. JG Wentworth is on a mission to help people get financially fit, so we can connect you with top lenders to provide customized loans for people stuck in the cycle of repayment on high-interest debts.*


To explore your personalized loan options today, check out our free online tool.


If a loan isn’t ideal for you, though, we might still be able to help! Our Debt Resolution Program could help you lower your debt and pay it off in as few as 24 to 48 months.**


To talk to one of our Debt Specialists about your options, give us a call today at (888) 505-1794.


Related Article: What’s the Difference Between Debt Consolidation and Debt Resolution?


Sources cited


  1. Calculate your debt-to-income ratio. Wells Fargo. (n.d.). Retrieved from

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