Definition
A ratio that compares your monthly debt payments to your monthly income. Lenders use it to determine your ability to manage additional debt.
What to consider
- This ratio is key when lenders review your loan applications.
- Lowering your debt can improve your chances of approval.
- Monitor both your income and debt to stay balanced.
Real world scenarios
- Before applying for a mortgage, Nikki calculates her debt-to-income ratio to confirm she meets the lender’s standards.
- Camille sees her ratio climb after financing a car and decides to pay down existing credit card balances to improve it.
- Monitoring this ratio helps Steven plan future loans responsibly, ensuring he doesn’t overextend himself.
Related terms
Related Playbooks
Get instant access to all our expert playbooks and 1-1 financial coaching when you join the Bolder Money community. Learn more here.
Budgeting & Spending
Creating Your First Spending Plan: A Step-by-Step Guide
Budgeting & Spending
Healthy Online Shopping Habits Blueprint
Budgeting & Spending
Healthy Food Spending Habits Guide
Budgeting & Spending
Smart Gift-Giving Strategy Guide
Budgeting & Spending
Smart Strategies for Cutting Back Expenses
Budgeting & Spending
Zero-Based Budgeting: Your Guide to Intentional Spending Success
