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Your debt-to-income (DTI) ratio is an important measure of your financial health. It compares the amount of your total monthly debt to your total monthly income, giving you an indication of how much of your income is going towards debt payments. To calculate your DTI, you will need to know the amount of your monthly debt payments and your total monthly income.
To start, gather all your monthly debt payments, such as credit cards, car loans, student loans, mortgages, and other loan payments. Add up all of these payments to determine your total monthly debt payments.
Next, calculate your total monthly income. This should include all sources, such as salary, wages, tips, bonuses, alimony, investments, and other income.
Finally, divide your total monthly debt payments by your total monthly income. The resulting number is your debt-to-income ratio.
For example, if your total monthly debt payments are $2,000 and your total monthly income is $6,000, your debt-to-income ratio would be 33.3%.
It is important to keep your debt-to-income ratio relatively low, since a high DTI ratio can have a negative impact on your credit score, affect your ability to get approved for loans, and limit your access to credit. Knowing your DTI can help you better manage your debt and improve your financial health.
To start, gather all your monthly debt payments, such as credit cards, car loans, student loans, mortgages, and other loan payments. Add up all of these payments to determine your total monthly debt payments.
Next, calculate your total monthly income. This should include all sources, such as salary, wages, tips, bonuses, alimony, investments, and other income.
Finally, divide your total monthly debt payments by your total monthly income. The resulting number is your debt-to-income ratio.
For example, if your total monthly debt payments are $2,000 and your total monthly income is $6,000, your debt-to-income ratio would be 33.3%.
It is important to keep your debt-to-income ratio relatively low, since a high DTI ratio can have a negative impact on your credit score, affect your ability to get approved for loans, and limit your access to credit. Knowing your DTI can help you better manage your debt and improve your financial health.
