Your Debt-to-Income Ratio (DTI) is one of the most important numbers lenders check when you apply for loans. It shows how much of your income goes toward debt payments each month—and whether you can comfortably take on more debt.
At Today Finserv Consulting India, we help borrowers understand and optimize their DTI to:
✔ Increase loan approval chances
✔ Qualify for better interest rates
✔ Avoid financial stress from overborrowing
What Is a Debt-to-Income Ratio (DTI)?
Simple Definition:
Your DTI compares your monthly debt payments to your monthly gross income, expressed as a percentage.
Example:
- Monthly debt payments = ₹25,000
- Monthly income = ₹1,00,000
- DTI = (25,000 ÷ 1,00,000) × 100 = 25%
How to Calculate Your DTI Ratio
Step 1: Add Up All Monthly Debt Payments
Include:
✅ Home loan EMI
✅ Car loan EMI
✅ Personal loan EMI
✅ Credit card minimum payments
✅ Other recurring debts
Exclude: Living expenses (rent, utilities, groceries)
Step 2: Determine Your Gross Monthly Income
Include:
✅ Salary (before deductions)
✅ Rental income
✅ Business profits
✅ Bonuses/commissions (averaged)
Step 3: Apply the DTI Formula
text
DTI % = (Total Monthly Debt ÷ Gross Monthly Income) × 100
Example Calculation:
| Debt Type | Monthly Payment |
|---|---|
| Home Loan | ₹18,000 |
| Car Loan | ₹7,000 |
| Credit Cards | ₹5,000 |
| Total Debt | ₹30,000 |
| Income Source | Monthly Amount |
|---|---|
| Salary | ₹90,000 |
| Rental Income | ₹10,000 |
| Total Income | ₹1,00,000 |
DTI = (30,000 ÷ 1,00,000) × 100 = 30%
DTI Categories: What’s a Good Ratio?
| DTI Range | Rating | Loan Approval Impact |
|---|---|---|
| Below 20% | Excellent | Best rates & terms |
| 20-35% | Good | Strong approval chances |
| 36-45% | Fair | May require justification |
| 46-50% | High Risk | Likely rejection |
| Above 50% | Dangerous | Automatic rejection |
Indian Lender Standards:
- Most banks prefer DTI below 40%
- Some NBFCs may accept up to 50% for secured loans
Why Lenders Care About Your DTI
1. Default Risk Assessment
Borrowers with DTIs above 40% are 3x more likely to default
2. Borrowing Capacity Evaluation
Helps determine how much additional debt you can handle
3. Interest Rate Determination
Lower DTI often qualifies for better rates
Real Impact: A 35% vs 45% DTI could mean 1.5% lower interest on a home loan
How to Improve Your DTI Ratio
Quick Fixes (1-3 Months)
✅ Pay down credit card balances
✅ Request higher credit limits (without spending more)
✅ Consolidate multiple debts into one loan
Long-Term Solutions
✔ Increase income through side hustles or career growth
✔ Avoid taking new debt while improving ratio
✔ Extend loan tenures to reduce EMIs (temporary solution)
Today Finserv’s DTI Optimization Services
- Debt consolidation strategies
- Loan restructuring advice
- Income documentation optimization
Special Cases & Exceptions
1. High-Income Earners
Some lenders allow higher DTIs (up to 50%) for incomes above ₹2L/month
2. Government Loans
Schemes like PMAY may have relaxed DTI requirements
3. Co-Applicant Scenarios
Combined DTI is considered for joint applications
Frequently Asked Questions
❓ Does rent count in DTI?
No, unless you’re applying for a mortgage where rent is being replaced
❓ How often should I check my DTI?
Before applying for any new credit, and quarterly for financial health checks
❓ Can I get a loan with 55% DTI?
Very unlikely with traditional lenders; consider improving ratio first
❓ Is DTI more important than credit score?
They’re equally important – lenders consider both together
