What is debt-to-income ratio?
Debt-to-income ratio, often shortened to DTI, is the percentage of your gross monthly income that goes towards monthly debt repayments.
DTI quick reference
Debt-to-income ratio explained in plain English
Debt-to-income ratio shows how much of your income is already spoken for by borrowing. If you earn £3,000 gross per month and your debt repayments are £900 per month, your DTI is 30%.
DTI is useful because income alone does not show affordability. Someone earning £5,000 per month with £2,500 of debt repayments may be under more pressure than someone earning £3,000 per month with £300 of repayments.
Lenders may look at DTI alongside credit history, income stability, living costs, existing commitments and the type of borrowing you want. A lower DTI can suggest more room for repayments, while a higher DTI can suggest more financial pressure.
DTI is not a full budget. It does not automatically account for rent, mortgage, childcare, bills, food, transport, savings or irregular expenses. It is a debt pressure measure, not a complete affordability guarantee.
Debt-to-income ratio formula
Add up monthly debt repayments, divide by gross monthly income, then multiply by 100.
DTI = (monthly debt repayments ÷ gross monthly income) × 100
Example:
monthly debt repayments = £900
gross monthly income = £3,000
DTI = (£900 ÷ £3,000) × 100
DTI = 30%
Calculate your DTI
Use the debt-to-income ratio calculator to compare monthly debt payments with gross monthly income.
What counts as monthly debt?
DTI usually focuses on regular debt commitments rather than every household bill. The exact items may vary depending on the lender or purpose of the check.
| Usually included | Usually not included in basic DTI |
|---|---|
| Loan repayments | Food and grocery spending |
| Credit card minimum payments | Utility bills |
| Car finance payments | Transport costs |
| Student loan or other debt deductions where relevant | Insurance and subscriptions |
| Mortgage or rent may be included in some affordability views | Savings goals and emergency fund contributions |
For personal planning, you may want to calculate both a debt-only DTI and a broader affordability view that includes rent or mortgage and essential living costs.
Simple DTI examples
These examples show why the same income can feel very different depending on existing repayments.
| Gross monthly income | Monthly debt payments | DTI | What it suggests |
|---|---|---|---|
| £3,000 | £300 | 10% | Low monthly debt pressure. |
| £3,000 | £900 | 30% | Moderate debt pressure. |
| £3,000 | £1,500 | 50% | High debt pressure and less room for bills or emergencies. |
Why lenders use DTI
Lenders use affordability checks to decide whether new borrowing looks manageable. DTI is one useful indicator because it shows how much income is already committed to repayments before adding another loan, card or finance agreement.
A high DTI can suggest that a borrower has less spare income for new repayments. It may also mean a small change in bills, income or interest rates could create payment pressure.
Check before taking new credit
Use the loan repayment calculator alongside DTI to see how a new monthly payment would change your debt pressure.
DTI vs affordability
A low DTI does not always mean a new debt is affordable, especially if rent, bills or childcare costs are high. A budget check is still needed.
How to improve DTI
- Pay down existing debts: reducing monthly repayments can lower DTI.
- Avoid taking new credit: new monthly repayments can push DTI higher.
- Clear small balances: removing a monthly payment can improve the ratio.
- Increase income: higher gross income can reduce the percentage if debt payments stay the same.
- Refinance carefully: lower payments can improve DTI, but check whether the total cost increases.
- Build a repayment plan: snowball or avalanche methods can help reduce outstanding commitments over time.