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 ?
From the view of the national economy, a better indicator may be the total debt to income ratio per person in which debt includes their mortgage payment.
An April 2012 IMF study by Daniel Leigh, Deniz Igan, John Simon, and Petia Topalova indicates that during the five years preceding the onset of the Great Recession, the household debt to income ratio in advanced economies "rose by an average of 39 percentage points, to 138 percent.
b) Cindy's debt to income ratio is less than 10%; this illustrates that Cindy's financial leverage is better than average financial leverage if an emergency should arise.
c) Cindy's debt to income ratio is 26%; this illustrates that Cindy has less than average financial leverage if an emergency should arise.
d) Cindy's debt to income ratio is 20%; this illustrates that Cindy has better than average financial leverage if an emergency should arise.