Debt-to-Income Ratio
Debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes to debt payments. Lenders use it to evaluate whether you can afford additional debt. Front-end DTI counts only housing costs; back-end DTI counts all monthly debt payments. Most personal loan lenders prefer DTI under 36%, though some subprime lenders approve up to 50%.
DTI is one of the main affordability checks in lending. Calculate it by adding up all your monthly debt payments (rent or mortgage, car payment, credit card minimums, student loans, existing personal loans) and dividing by your gross monthly income.
DTI thresholds
Most lenders use these benchmarks:
- Below 28%: comfortable
- 28-36%: acceptable for most loans
- 36-43%: stretched, but most subprime lenders still approve
- 43-50%: high risk, fewer lenders will approve
- Above 50%: most lenders decline
Subprime lenders often go higher than mainstream lenders: some approve up to 50% DTI for borrowers with strong income stability. Mainstream lenders typically cap at 43% for unsecured personal loans.
Front-end vs back-end DTI
- Front-end DTI: housing costs only (rent or mortgage + property tax + insurance) divided by income
- Back-end DTI: all debt payments (housing + cars + cards + loans) divided by income
When personal loan lenders mention DTI, they almost always mean back-end. Mortgage lenders look at both.
Why this matters for borrowing
If your DTI is already high, taking on more debt increases default risk and may also push you into a worse loan offer (smaller amount, higher rate). The affordability calculator shows how much you can comfortably borrow within a 36% target DTI based on your income and existing debts.