Debt to Income Ratio Calculator

 

If you have been taking out loans, you must be aware of the fact that the 3-digit credit score is perhaps the most important figure that is checked by the lenders before lending you a loan amount. But did you know that there is another 2-digit number that is equally important when you take out a loan? Yes, this is the debt-to-income ratio or the DTI ratio and the good news is that it won’t even cost you a penny to calculate the DTI ratio before you negotiate with the lenders. Therefore, if you think that you need to get an insight into your financial life so that you can take better financial decisions, you should use the debt-to-income ratio calculator. If you want to take out unsecured debt consolidation loans or a mortgage loan, the lender will always check your DTI ratio and if you want to be on the safer side, you have to do some smart calculations

 

A brief explanation of the debt-to-income ratio

As the name suggests, the debt-to-income ratio is the total amount of debt that you carry as compared to the monthly income that you make in a month. If you want to calculate your DTI ratio, you may have to calculate your back-end ratio by adding up all the monthly debt obligations like your mortgage, car loan, student loan and home equity loan payments. Take this figure and divide it by the total monthly income from all sources and you will get the DTI ratio. In general the DTI ratio should be maintained below 36% and if you cross it, you will probably be on a slippery slope.

 

Using a debt to income ratio calculator

There are many debt calculators available in the internet and the debt-to-income ratio calculator is just one among them. When you’re planning to take out a home mortgage loan for buying a house, you have to use a debt-to-income ratio calculator in order to make the exact calculations. As the mortgage lender will check this ratio, if you can work on it even before you approach your lenders, you can easily grab a mortgage loan with an affordable rate.

 

When you have to calculate the DTI ratio, you have to make sure that you keep the ratio at the best level so that you don’t have to be subject to high rates on the loan. High rates will always mean high monthly payments and therefore you should try your best in order to save your dollars on the unsecured debt consolidation loan or a mortgage loan.