How much of your income is used up paying monthly debt payments?
Our debt to income ratio calculator compares your monthly take-home with your monthly debt payments. Lenders use the debt to income ratio to determine how much debt you can carry. We use the same debt ratio calculator to see how healthy your debt load is. A ratio of 36% or less is considered healthy, above 50% and you should consider talking to a debt expert.
Is your debt to income ratio too high?
1. Calculate Your Income
2. Calculate Your Debt Payments
Your total monthly income or total monthly debts cannot equal 0.
Total Monthly Income:
Total Monthly Debts:
30% or less: Good. You are probably OK. Debt repayment is not consuming a significant amount of your monthly pay, leaving you room to increase your payments enough to pay off your debts on your own. Build your budget, create a repayment plan, stick with that plan and you will likely find yourself in much better shape within a year.
31-42%: Manageable. While you may be able to manage with a debt repayment ratio this high, you are at the maximum range of acceptable. If a significant number of your debts have variable rate interest (like lines of credit) start working to reduce your debt now as rising interest rates will mean more of your paycheque will be going towards debt repayment in the future. If you are only making minimum payments, next month keep your payments the same. Having a higher, fixed, monthly payment, will help you get out of debt sooner.
43-49%: Cause for Concern. Any variation in income or interest can put you in the danger zone. If you only included minimum payments, you may not have enough room in your income to increase your payments enough to pay off your non-mortgage debts. We help many people with debts in this range make a successful proposal for partial repayment to their creditors.
50% or more: Dangerous. If debt repayment is taking up more than 50% of your paycheque, you are facing a debt crisis that you probably can’t deal with on your own. It’s time to talk about options for debt forgiveness, so you can lower your monthly payment to a much more affordable level.