What Is Debt-to-Income Ratio (DTI), and How to Get It Right?

What Is Debt-to-Income Ratio (DTI), and How to Get It Right?

Everything you need to know about DTI and how a favourable ratio can help improve your chances of loan approval.
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In Summary


DTI helps you understand how much of your gross monthly income is committed to existing debt payments. Calculating it before applying for a personal loan can help you assess your current repayment commitments and plan additional borrowing.


  • Calculate DTI by dividing total monthly debt payments by gross monthly income and multiplying by 100.
  • A lower DTI generally means a smaller portion of your income is committed to debt repayments.
  • Reducing existing debt can help lower your DTI over time.
  • Avoid taking on unnecessary debt that could increase your monthly obligations.
  • Consider the potential EMI of a new personal loan along with your existing commitments.
  • DTI is one of several factors lenders may consider when assessing a loan application.

Review your income, existing EMIs, credit profile and applicable eligibility criteria before applying for a personal loan.

Debt-to-income ratio (DTI) measures the portion of your gross monthly income that goes towards your monthly debt payments. It is expressed as a percentage and helps you understand how much of your income is committed to existing debt obligations.


To calculate DTI, divide your total monthly debt payments by your gross monthly income and multiply the result by 100. For example, if your monthly debt payments are Rs. 20,000 and your gross monthly income is Rs. 80,000, your DTI is 25%.


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How does debt-to-income ratio (DTI) work?

DTI helps you assess your existing debt obligations against your income. Financial institutions may consider DTI along with other factors when assessing your loan application and repayment capacity.


A lower DTI indicates that a smaller portion of your monthly income is committed to debt payments. However, DTI is only one factor used during loan assessment and does not guarantee loan approval or a specific loan amount.


You can use a personal loan EMI calculator to estimate your monthly repayment and assess how a new EMI could affect your overall debt obligations.

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How can you improve your DTI ratio?

You can take the following steps to manage your DTI:


  • Reduce existing debt: Paying down outstanding debt can reduce your monthly debt obligations over time.
  • Avoid unnecessary borrowing: Taking on additional debt can increase your monthly repayment commitments and raise your DTI.
  • Increase your income: A higher gross monthly income can lower your DTI if your monthly debt payments remain unchanged.
  • Review your expenses: Track your monthly income and debt payments regularly to understand your current DTI.
  • Plan new borrowing carefully: Before taking a personal loan, calculate the potential EMI and assess whether it fits within your monthly budget.
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Why is DTI important when applying for a personal loan?

DTI provides an indication of how much of your income is already committed to debt repayments. A high DTI can indicate that a larger share of your income is being used for existing debt obligations.


When you apply for a personal loan, the lender can assess your income, existing obligations, credit profile and other applicable eligibility criteria. Reviewing your DTI beforehand can help you understand your current repayment commitments and plan additional borrowing responsibly.


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How can you calculate your DTI?

You can calculate DTI using this formula:


DTI = (Total monthly debt payments ÷ Gross monthly income) × 100


For example:

ParticularsAmount
Gross monthly incomeRs. 80,000
Monthly debt paymentsRs. 20,000
DTI25%

In this example, 25% of the borrower's gross monthly income goes towards existing monthly debt payments.

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What should you do before applying for a personal loan?

Before applying, review your income, existing EMIs and other debt obligations. Calculate your DTI and estimate the additional EMI for the amount you plan to borrow.

You can also check the applicable personal loan eligibility criteria and review the loan terms before submitting your application.

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Key offerings: 3 loan types

  • Flexi Hybrid Loan
  • Flexi Dropline Loan
  • Term Loan

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    You can pay interest-only EMIs for up to 36 months, after which, the EMI will consist of both, the principal and the interest. EMI is applicable only on the withdrawn amount.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest on the loan amount you withdraw.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Amount disbursed in one go
    The entire loan amount is disbursed at the start.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest.

  • Flexi facility charges
    No Flexi facility charges.

Personal loan interest rate and applicable charges

Type of fee

Applicable charges

Rate of interest per annum

10% to 30.5% p.a.

Processing fees

Up to 4.13% of the loan amount (inclusive of applicable taxes).

Flexi Facility Charge

Term Loan – Not applicable

Flexi Loans –Up To Rs 1,999 To Up To Rs 18,999/- (Inclusive Of Applicable Taxes)

Will be deducted upfront from loan amount.

Bounce charges

Rs. 700 to Rs. 1,200/- per bounce

“Bounce charges” shall mean charges for (i) dishonor of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonor of payment mandate or non-registration of the payment mandate or any other reason.

Part-prepayment charges

Full Pre-payment:

  • Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment

  • Flexi Term (Dropline) Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

  • Flexi Hybrid Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

Part Pre-payment

  • Up to 4.72% (Inclusive of applicable taxes) of the principal amount of Loan prepaid on the date of such part Pre-Payment.

  • Not Applicable for Flexi Term (Dropline) Loan and Flexi Hybrid Term Loan.

Penal charge

Delay in payment of instalment(s) shall attract Penal Charge at the rate of up to 36% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount.

Stamp duty (as per respective state)

Payable as per state laws and deducted upfront from loan amount.

Annual maintenance charges

Term Loan: Not applicable

Flexi Term (Dropline) Loan:

Up to 0.295% (Inclusive of applicable taxes) of the Dropline limit (as per the repayment schedule) on the date of levy of such charges.


Flexi Hybrid Term Loan:

Up to 0.472% (Inclusive Of Applicable Taxes) Of The Dropline Limit During Initial Tenure. Up to 0.295% (Inclusive Of Applicable Taxes) Of Dropline Limit During Subsequent Tenure

Credit guarantee scheme feeUp to 1.18% p.a. (pro-rated daily till 31st March) (inclusive of all applicable taxes) of the loan amount
Credit guarantee scheme renewal feeUp to 1.18% p.a. (inclusive of all applicable taxes) on the outstanding loan amount as on April 01 of the subsequent Financial Year.
*Renewal Fee to be collected only for 3 subsequent financial years.
 
**If the Remaining Tenure is less than 12 months, the CG Fee in subsequent years shall be charged prorated.

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Frequently asked questions

Overview

How to determine debt-to-income ratio DTI?

To determine your debt-to-income ratio (DTI), add your total monthly debt payments, divide the amount by your gross monthly income, and multiply the result by 100 to get the percentage.

A DTI below 36% is often considered healthy, as it means less of your gross monthly income goes towards debt payments. However, lenders may use different DTI limits based on their assessment criteria.

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