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August 31, 2026

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I remember the first time a loan officer asked me what my debt to income ratio was, I froze. I could rattle off my credit score without blinking, my bank balance too, but this number, the one lenders actually weigh the most before they approve anything? I didn't have a clue.

Your debt to income ratio, or DTI, is just your monthly debt payments (not counting rent or your mortgage) divided by your monthly income, turned into a percentage. Keep that number at 35 percent or lower and you're in solid shape, ideally closer to 15 percent, and lenders take notice. A lower DTI means better odds of approval and better interest rates when you do need to borrow, which can save you real money over the life of a loan.

It only takes a few minutes to do the math, and once you know your number, you know exactly where you stand, no more guessing about how a lender sees you on paper.

Be Well,
Anisa

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Why Your Debt-to-Income Ratio Matters

Thrifty
Photo: Grabbing my coffee and doing the debt-to-income math right at my kitchen table, it takes less time than you'd think.

Lenders lean on your debt-to-income ratio because it shows them, at a glance, how much of your paycheck is already spoken for before you even ask to borrow more. A high ratio signals that you're stretched thin, which makes lenders nervous and pushes your interest rates up. A low ratio tells them your income has room to spare, and that makes you a safer bet.

The tricky part is that this number stays invisible until you sit down and calculate it yourself, so plenty of people don't find out where they stand until they're already mid-application for a car or a home.

How To Do It

1. List your monthly debt payments. Add up the minimum payments on credit cards, car loans, student loans, and any personal loans. Leave rent and your mortgage out of this total.

2. Find your gross monthly income. Use your income before taxes and other deductions come out, not your take-home pay.

3. Divide and convert to a percentage. Divide your total debt payments by your gross monthly income, then multiply by 100. That's your DTI.

4. Know which zone you're in. 35 percent or below is healthy, with 15 percent as the ideal. 36 to 42 percent means it's time to make a plan. 43 to 49 percent means you should expect real financial strain if nothing changes.

5. If you're above 35 percent, target one debt at a time. Focus extra payments on your highest interest balance first, then move to the next once it's paid off.

6. Recheck your number every few months. As balances drop, watch your ratio move with them. It's a good way to see your progress in black and white.

It's a Small Calculation With Big Savings

Working your debt-to-income ratio down to 35 percent or lower, alongside a healthy credit score, is often what stands between you and the loan terms you actually want. Even a point or two off your interest rate can add up to thousands of dollars over the life of a car loan or mortgage.

That's what living thrifty really comes down to, knowing your numbers so your money works for you instead of against you.

Got a tip of your own? Reply back to me, I love reading your tips and ideas!


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