Debt-to-Income Ratio Calculator

Weigh your monthly debt payments against your income to see if you’re overextended.

Debt-to-income ratio

A debt-to-income ratio (DTI) is a key factor that lenders use to determine if you’ll be approved for a loan. During the underwriting process after you apply for a loan, the underwriter will check your debt-to-income ratio to see if you can afford the loan payments. If your DTI is too high, you won’t get approved for the loan.

For consumers, debt-to-income is an easy way to measure the overall health of your finances. You can check your DTI to see if you have too much debt for your income. If your debt ratio is too high, then you know to scale back and focus on debt repayment. If you need help, call 1-888-294-3130 to speak with a trained credit counsellor for a free debt and budget evaluation.

How to calculate debt-to-income ratio

Debt-to-income compares your total monthly debt payments to your total monthly income. You add up all your monthly debt payments, plus insurance, then divide it by your total monthly income and multiply by 100. This gives you your DTI ratio. This calculator will walk you through everything that should be included when calculating your DTI.

What does your debt-to-income indicate?

DTIWhat it means
Less than 36%You have a good amount of debt relative to your income, which should make it easier to maintain financial stability. If you apply for new financing, you should have little trouble getting approved, as long as your credit score is high enough to qualify.
37-41%This is within a normal range of how much debt you should have relative to your income. However, you may need to eliminate some debt before you apply for your next loan or line of credit. This will make it easier to ensure you can get approved.
41-45%Having this much debt will make it difficult to find a lender that will extend you a new line of credit. You should take action to reduce debt and stop making new charges on your credit cards until you’ve paid off some of your balances. Consider options, like debt consolidation, that can make it easier to pay off your balances.
More than 50%This much debt is bad for your financial health and you need to get help immediately. This much debt may make it difficult to pay off on your own, since you have too much debt to qualify for do-it-yourself options, like debt consolidation loans. Call [PhoneNumber] to review your options for relief with a trained credit counsellor.

How lenders use debt-to-income ratio during loan underwriting

Anytime you apply for a loan or line of credit, you go through the loan underwriting process. A loan agent reviews your debts, income and credit to see if you’re a good candidate to receive a loan. During this process, one of the key metrics they assess is your DTI. If you have a debt-to-income ratio above 41 percent with the new loan payments factored in, most lenders won’t approve you for the loan. There are some lenders that may loan to borrowers with DTI ratios as high as 45 percent, however, this is rare. In addition, you should expect to pay higher interest rates. The loan may also have more restrictive terms.

If you get rejected for a loan application because your DTI is too high, then you’ll need to implement a strategy to reduce your debt before you apply again. One of the best places to start is to look at your credit card debt. If you’re carrying one or more balances on high interest rate credit cards, look for ways to pay off those debts first.

How much debt does the average Canadian have before they seek help?

Debt-to-income ratio is a good metric to use to decide if you’ll need help to get out of debt. When your DTI is too high to get approved for new loans, you won’t be able to consolidate on your own. This means you’ll need help to get out of debt. Credit counselling is usually the right place to start, so you can get an unbiased expert opinion on the best way to get out of debt in your unique financial situation.

To help you understand when it may be time to get help, this map shows the average debt-to-income ratio of Canadians who’ve called us for help. You can see the average DTI for other Canadians in different provinces and territories that realized that they needed help to get out of debt.

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