Key Takeaways
- DTI compares monthly debt payments with gross monthly income.
- Lenders use DTI to judge affordability.
- Lowering DTI can improve approval odds.
Your debt-to-income ratio (DTI) is one of the first numbers a lender looks at when you apply for a loan — including a debt consolidation loan. It shows how much of your income is already committed to debt payments. Use the calculator below to find yours, then see what it means and how to improve it.
This article is for general educational purposes and isn’t personalized financial advice.
For planning only. Lenders may count income and debts slightly differently.
What DTI Is
DTI is your total monthly debt payments divided by your gross monthly income (before taxes), shown as a percentage.
For example, if you earn $5,000 a month before taxes and pay $1,400 in rent, $350 for a car, and $300 in minimum card payments, your DTI is $2,050 ÷ $5,000 = 41%.
What Counts as Debt
Lenders typically include:
- Rent or mortgage payments (including property taxes and insurance if escrowed)
- Auto loans and leases
- Minimum credit card payments
- Student loans
- Personal loans and other installment debt
- Child support or alimony you pay
They usually don’t include everyday expenses like utilities, groceries, phone bills, or insurance premiums not tied to a loan.
What’s a Good DTI?
| DTI | How lenders typically see it |
|---|---|
| 35% or less | Healthy; strong approval odds |
| 36%–43% | Manageable; terms may be less favorable |
| 44%–50% | High; approval is harder |
| Above 50% | Very high; many lenders will decline |
These ranges are general guides. For mortgages, 43% has long been a common benchmark, while some personal lenders accept up to about 50%.
Why DTI Matters for Debt Consolidation
A consolidation loan replaces your card payments with one new payment. Some lenders calculate your DTI after consolidation, using the new payment instead of your current card minimums. If the loan payment is lower than your current minimums combined, your DTI may look better than you expect.
For more on approval factors, see debt consolidation loan requirements.
How to Lower Your DTI
Reduce your monthly payments
- Pay down card balances, which lowers minimum payments.
- Refinance or consolidate high-rate debts into a lower payment.
- Ask about a debt management plan, which can lower card rates and payments without a new loan.
Increase your income
- Include all regular income you can document: side work, alimony received, benefits.
- A raise or second income source lowers your ratio immediately.
Avoid new debt
Every new monthly payment raises your DTI. Hold off on new car loans or financing before applying for a consolidation loan.
DTI vs. Credit Utilization
They’re easy to confuse:
- DTI compares monthly debt payments to monthly income. It’s not part of your credit score, but lenders use it to judge affordability.
- Credit utilization compares card balances to card limits. It’s a major factor in your credit score. See credit utilization explained.
What to Do If Your DTI Is Very High
If your DTI is above 50%, a new loan may be hard to get and hard to afford. Consider:
- A free session with a nonprofit credit counselor
- Our guide on how much debt you can realistically afford to pay off monthly
- Comparing debt relief options beyond consolidation
Frequently Asked Questions
Is DTI based on gross or net income? Lenders use gross (before-tax) income.
Does DTI affect my credit score? No. Income isn’t on your credit report. But a high DTI can still lead to loan denials.
Do utilities count toward DTI? Usually not. Lenders focus on debt obligations.
How quickly can I lower my DTI? Paying off a card or a small loan can lower it right away; lenders use your current payments when you apply.
Example: Calculating DTI
A borrower earns $5,000 a month and pays $1,200 rent, $300 car, and $400 in card minimums, for $1,900 total.
Their DTI is 38%. Paying off the $300 car loan would lower it to 32%.
Figures are hypothetical and rounded, for illustration only. Actual rates, fees, and outcomes depend on the lender or provider and your credit profile.
Frequently Asked Questions
Is rent included in DTI?
Housing payments are typically included.
What is a good DTI?
Lower is better; many lenders prefer under about 36% to 43%.
Does DTI affect credit scores?
No, but it affects loan approval.
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