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Debt to Income Ratios

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Debt to Income Ratios

4/21/2021

You can calculate your debt-to-income ratio by dividing your total monthly debt payments by your monthly income. This ratio is essential when exploring loan options because lenders will likely use this to measure your ability to make payments on the money you borrowed. This ratio does not affect your credit score because creditors cannot see your income; therefore, they cannot calculate. 

For example, if your gross income for the month is $5,000 and your total debt payments equal $1,500, your debt-to-income ratio would be 30%. Generally, a debt-to-income ratio that lenders look for varies by what the loan would be. For a mortgage, lenders typically prefer to see a debt-to-income ratio smaller than 36%, whereas, for auto lending, lenders generally look for it to be no higher than 45-50%. 

You can read more about debt-to-income ratios here

American 1 Credit Union offers multiple loan options. Contact us to get your application started today!  



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