How To Calculate Your Debt-To-Income Ratio.

Getting your numbers right.

Before applying for a loan or credit card, take a look and see how things currently stack up and where you stand financially. You'll want to know where you currently stand because one of the first things your bank will want to determine is how risky it might be to lend money to you.

The Debt-To-Income Ratio

The Debt-To-Income Ratio (DTI) is one of the most important statistics that banks will use in determining how well they think you can afford the debt they're considering giving to you.

What is a South African person’s DTI?

The average household debt-to-income ratio in South Africa from 1969 to 2017 was 57.58 percent. The highest the ratio has ever been is 86.40 percent, which was recorded in 2008, while the lowest it has ever been is 40.43 percent, recorded in 1980.

What is the significance of the DTI?

If you approach a bank for a loan for something like a house, they will work out how your personal DTI affects your likelihood of paying off the investment. Basically, it's an indication of whether or not you can manage both your debt and income over time.

The lower the DTI is, the less likely you are to pay your bond in full on time each month. If you happen to be working with a mortgage broker they may talk about DTI when negotiating loans and determining borrowing capabilities.

How to calculate DTI

Add up the total amount being paid every month on debt payments. Divide this by how much income you get monthly, then divide that figure by 100. The Debt-To-Income ratio (DTI) is one of the most important factors when it comes to receiving a mortgage. It is the ratio of your monthly debt payments to your gross monthly income. Your DTI is used by mortgage lenders to assess how much of your income can be used for your monthly mortgage payment. To calculate it, simply take the total of all your monthly debt payments, including your estimated mortgage payment, and divide it by your gross monthly income.

For more information on how to calculate your DTI, contact Credit Health.

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