Debt-to-Income Ratio

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Debt-to-Income Ratio

The amount of an individual or company's gross income that it spends on debt service as a percentage of its total gross income. The higher the DTI is, the less likely it is that the individual or company will be able to repay debt. As a result, financial institutions use the DTI in informing decisions on whether or not to make loans. Often, the "debt" in the term refers to all liability payments (such as employee wages, taxes, and utility bills) and not simply to debt.
References in periodicals archive ?
The report finds that emerging markets have considerable scope to increase personal wealth given their much lower ratio of net financial assets to income and a much lower debt-income ratio than found in mature economies.
The debt-income ratio rises in the short run but falls in the long run, because of higher output, inflation, and government revenue.
It is possible to envisage circumstances where interest rates may need to rise considerably, but, in my personal view, the rise in the debt-income ratio should make us more cautious about doing so.
These periods of low saving were certainly periods when the ratio of debt to income was high, and the rising saving rate after the war did occur when the debt-income ratio was falling.
However, due to the "convenience' use of credit cards, the increase in the debt-income ratio may be overstated as a measure of borrowing capacity.
Although household debt-income ratios remain high, debt-service burdens have fallen appreciably, partly reflecting the refinancing of mortgages at lower interest rates.
In all leading OECD economies savings ratios were falling and debt-income ratios rising as people were encouraged to borrow more in order to spend more.