How to Calculate Your Debt-to-Income Ratio

Calculate Your Total Monthly Debt

You can calculate your debt-to-income ratio by dividing your total monthly debt by your gross monthly income.

Calculate Your Total Monthly Income

The next step in calculating your debt-to-income ratio is to determine your monthly income.

Perform the Simple Calculation

Once you have calculated the amount of debt you pay monthly and the income you receive monthly, you will have the numbers you need to calculate your debt-to-income ratio.

What Your Debt-to-Income Ratio Means

Your final result will fall into one of these categories. A 36% or lower is the healthier financial load for most people. If your debt-to-income ratio falls within these ranges, avoid taking on more debt to maintain a good ratio. You may have difficulty getting approval for a mortgage if your rate exceeds this number. From 37% to 42% is not a bad ratio, but it could be better. If your rate falls within these ranges, you should start reducing your debt. From 43% to 49% is a rate that indicates potential financial problems. You should begin to aggressively pay down your debt to prevent becoming excessively indebted. 50% or more is a very dangerous rate. This means that more than half of your income goes towards debt payments each month. You should aggressively pay down your debt. Do not hesitate to seek professional help.

Source: https://www.thebalancemoney.com/how-to-calculate-your-debt-to-income-ratio-960851