Debt-to-Income Ratio Calculator

How the debt-to-income calculator works

Debt-to-income asks a single question: of every dollar that comes in each month, what share is already promised to someone you owe? The arithmetic is a straight division.

This page adds up the four obligation fields — existing loan payments, credit card minimums, lease or rent, and other debt payments — to get total monthly debt. That total divided by gross monthly income gives the current ratio. The proposed new loan payment is then added on top and the division repeated, which produces the second figure: the ratio you would actually carry if the new debt were funded. Both numbers are shown because they answer different questions. The current ratio describes where the business stands today; the forward ratio describes where a decision would put it.

What counts as a monthly debt obligation

The ratio counts contractual, recurring payments — the ones that arrive whether or not the month was a good one. Term loan and equipment loan payments, the minimum due on business credit cards and lines of credit, vehicle notes, and other financed obligations all belong in the numerator. What does not belong is variable operating spending: payroll, inventory, utilities, marketing, and cost of goods are real cash outflows, but they are not debt service.

Rent and equipment leases sit in a grey area, and different guidelines treat them differently. Some count them, on the reasoning that a landlord's invoice competes for the same dollars as a lender's, and a business that cannot pay rent will not be paying its notes either. Others exclude occupancy and count only financed debt. The lease and rent field on this page lets you run it both ways: enter the amount to include it, or set it to zero to see the financed-debt-only version of the ratio.

Where the 36%, 43%, and 50% thresholds come from

The three targets in the toggle reflect the levels that appear most often in published underwriting guidance. Many lenders reference 43% or below as a common ceiling for qualifying ratios — a figure widely adopted since it entered consumer mortgage rules. A 36% target is the more conservative convention, historically associated with traditional bank underwriting. Around 50%, a file is generally treated as stretched, and only some programs will consider it at all.

These are underwriting conventions rather than requirements that bind a business loan file. Every lender writes its own credit policy, and the number in that policy is the one that governs a given application. A ratio just under a threshold is not an approval, and a ratio just over it is not a decline — underwriters weigh time in business, collateral, reserves, credit history, and industry alongside the ratio.

Reading the capacity number

The remaining-capacity figure inverts the formula. Instead of asking what your ratio is at a given payment, it asks what payment your income supports at a given ratio. Multiply gross monthly income by the target to get the total debt service the threshold permits, then subtract the debt already in place. What remains is the largest additional monthly payment that would still land at or under the target. When existing debt already exceeds the permitted total, the figure floors at zero, because there is no headroom to distribute.

That number is a payment, not a loan amount. Converting it into a principal figure requires a rate and a term, which is what an affordability calculator does with the payment as its input.

Why commercial underwriting often uses DSCR instead

DTI has an obvious blind spot: it divides by gross revenue and ignores what it costs to produce that revenue. Two businesses can each bill $40,000 a month and post an identical ratio while one clears $12,000 in profit and the other clears $1,500.

This is why commercial files frequently lean on the debt service coverage ratio instead. DSCR divides net operating income — revenue after operating expenses — by total debt service, so it measures the profit actually available to make payments rather than the top line. DTI remains useful as a fast screen and as a way to size relative obligations, and it is often the first number looked at because it needs only two inputs. But on a business file it is generally a starting point rather than the deciding metric.

What moves the ratio

• Gross monthly income — the denominator. A dollar added to income moves the ratio less than a dollar added to an obligation, because the income effect is spread across the whole denominator. At a 19.5% ratio, $1,000 of extra revenue moves the ratio about half a point, while $1,000 of extra payment moves it about two and a half points. The two effects only match when the ratio reaches 100%.
• Credit card minimums — the minimum due, not the balance, is what enters the ratio, so a large balance on a low minimum registers as a small number here.
• Term length on existing debt — a longer term lowers the monthly payment and therefore the ratio, while raising total interest paid over the life of the loan.
• Consolidation — replacing several payments with one can change the ratio in either direction depending on the resulting payment. A consolidation calculator shows the arithmetic.
• The proposed payment itself — the gap between the two ratios on this page is exactly the new payment divided by income.