If a borrower is paid $250 per week and his housing expense is $600 per month and his only debt is a car payment for $250 per month. Then his total debt-to-income ratio will be 78.5%.
Your overall financial health is significantly impacted by your debt-to-income (DTI) ratio. You can decide whether or not you should apply for credit by using the DTI1 calculator to assess your comfort level with your current debt.
Lenders look at your DTI when you ask for credit to help them assess the risk of you taking on additional obligation. Make your own debt-to-income calculations and learn what it means to lenders.
In this case: $600 + $250 = $850 (monthly expenses)
$250 × 52 weeks ÷ 12 months = $1,083 (monthly gross income)
Debt-to-income ratio = $850 ÷ $1,083 = 78.5%.
To know more about Debt-to-income ratio refer:
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