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Debt to Income Ratio Calculator

Is your debt to income ratio too high?

How much of your income is used up paying monthly debt payments? Our debt to income ratio calculator the percentage of your monthly debt payments to your gross monthly income. This is a popular ratio used when qualifying for a loan but it’s also very important to you to know just how affordable your debt is.

Most lenders suggest your debt-to-income ratio should not surpass 43%.  We think a ratio of 30% or less is what you need to be financially healthy and anything above 43% is cause for concern. If you are facing a ratio of 50% or more, you should consider talking to a debt expert about your debt relief options.

1. Calculate Your Income

2. Calculate Your Debt Payments

Total Monthly Income:

Total Monthly Debts:

Calculate Debt Ratio

Your total monthly income or total monthly debts cannot equal 0.

We respect your privacy. The information entered into this calculator will not be saved, stored, sold or used for any reason. Please see our privacy policy for more information.

Debt Ratio:

30% or less: Good. You are probably OK. Debt repayment is not consuming a significant amount of your monthly pay, leaving you room to increase your payments enough to pay off your debts on your own. Build your budget, create a repayment plan, stick with that plan and you will likely find yourself in much better shape within a year.

31-42%: Manageable. While you may be able to manage with a debt repayment ratio this high, you are at the maximum range of acceptable. If a significant number of your debts have variable rate interest (like lines of credit) start working to reduce your debt now as rising interest rates will mean more of your paycheque will be going towards debt repayment in the future. If you are only making minimum payments, next month keep your payments the same. Having a higher, fixed, monthly payment, will help you get out of debt sooner.

43-49%: Cause for Concern. Any variation in income or interest can put you in the danger zone. If you only included minimum payments, you may not have enough room in your income to increase your payments enough to pay off your non-mortgage debts. We help many people with debts in this range make a successful proposal for partial repayment to their creditors.

50% or more: Dangerous. If debt repayment is taking up more than 50% of your paycheque, you are facing a debt crisis that you probably can’t deal with on your own. It’s time to talk about options for debt forgiveness, so you can lower your monthly payment to a much more affordable level.

How to Calculate Your Debt to Income Ratio

To calculate the share of your income consumed by debt repayment, fill in the numbers in our easy-to-use debt-to-income ratio calculator.

Step 1: Total your gross monthly income (before of taxes)

Include all income sources, including employment income, pension, support payments, and government assistance. If you are self-employed, include your gross business income net of operating expenses but before taxes and personal benefits.

My paycheque
Spouse’s paycheque
Child tax benefit
Pension income
Alimony/child support
Other income
TOTAL MONTHLY INCOME

Step 2: Add your debt payments (monthly minimums)

Add in all monthly recurring debt payments:

Rent or mortgage payment
Credit card payments
Car payments
Student loan payments
Bank or other loan payments
Installment loans, rent-to-own
Other debt payments
TOTAL MONTHLY DEBT PAYMENTS

We include both rent and mortgage payments in this calculation. Why? Because a mortgage is a critical component of many people’s debt problems, and to make the ratio comparable, those without a mortgage should substitute their monthly rent payment.

You may also want to add in monthly spousal support payments if these obligations take up a significant portion of your income.

Step 3: Now run this formula or click calculate

DTI = TOTAL MONTHLY DEBT PAYMENTS divided by TOTAL MONTHLY INCOME

For example, if your total monthly income was $2,800 and your debt payments totaled $1,200 then your debt-to-income ratio is:

$1,200 / $2,800 = 42%

Understanding your debt-to-income ratio

A low debt-to-income ratio (DTI) ensures you can afford the debt you carry. If you are applying for a new loan, lenders consider your debt-to-income ratio as part of the loan approval process in addition to your credit score.

The type of debt you carry is also a factor in assessing the reasonableness of your DTI. A high ratio driven by good debt like a mortgage is better than a high ratio because of substantial consumer debt like credit cards or payday loans.

In general,

  • 30% or less is good
  • 31% to 42% is manageable
  • 43% to 49% is cause for concern
  • 50% or higher is dangerous

You will likely have a higher debt-to-income ratio in your younger years, especially if you are living in a city with high real estate values like Toronto or Vancouver. As you approach retirement, you should lower your debt load, so it will be affordable when you earn your lower fixed retirement income.

Lowering your debt balances

You can improve your debt-to-income ratio either by increasing your income or by reducing your debt. For most people, the first option is not viable; however, everyone should have a plan to get out of debt.

To ensure that you’re making progress, recalculate your debt-to-income ratio every few months. By seeing your DTI fall, you are more likely to remain motivated to bring it down further.