DTI (Debt-to-Income)

Debt-to-Income (DTI) is a financial ratio used to measure an individual's ability to manage monthly debt payments relative to their gross monthly income. It is calculated by dividing total monthly debt payments (like loans and credit card bills) by gross monthly income, then expressed as a percentage. A lower DTI indicates better financial health, meaning a person has more income available after paying debts. Lenders often use DTI to assess risk when considering loan applications, as it helps determine how much additional debt a borrower can handle without financial strain.