DTI calculation and meaning (first half). Debt-to-income ratio (DTI) is a lender shorthand: monthly debt obligations ÷ gross monthly income. It signals capacity to absorb more debt. In the example, monthly obligations sum to: $1,200 (rent) + $350 (car) + $150 (credit min) + $200 (student loan) = $1,900. With gross monthly income of $5,000, DTI = 1,900 ÷ 5,000 = 0.38 = 38%. Lenders use different cutoff thresholds, but higher DTIs generally reduce loan eligibility or yield higher pricing because more of your monthly income is committed to debt service.

How to use and improve DTI (second half). To improve DTI you can raise gross income (harder), reduce monthly debts (refinance to lower payments, accelerate payoff, or consolidate to a lower-payment loan), or temporarily reduce discretionary obligations. When planning for a mortgage or other major borrowing, compute DTI including the new payment to see if you’d meet lender guidelines. Be cautious: consolidation that reduces monthly payment by extending term lowers DTI but can increase total interest. Aim for sustainable monthly obligations rather than short-term improvements that create long-term cost.