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What is the debt-to-income ratio?

The debt-to-income ratio, or debt ratio, is a unit of measure that allows you to compare income before taxes with total debt. This information is particularly useful when you plan to ask for a loan from a financial institution. The institution will interpret your debt ratio as an indicator of your current financial status and your capacity to pay back the loan. Depending on your debt level, it may approve or refuse the loan.

How to calculate your debt ratio?

You need to calculate the total amount of your monthly payments in relation to your gross monthly income. The following table will help you calculate your debt ratio accurately.

  • Your Information
  • Income
  • Gross monthly income (before deductions)
  • Other monthly income
  • Monthly income total
  • Debt payments
  • Monthly mortgage payment
    (including taxes and insurance)
  • Auto loan monthly payment
  • Monthly credit card bills
  • Personal loan payment
  • Student loan payment
  • Child support and alimony payment
  • Other monthly debt payments
    (e.g. cottage, motorcycle, household appliances)
  • Total monthly debt payments
  • Debt ratio:
  • This field is for validation purposes and should be left unchanged.

“If your debt ratio is greater than 40% or near that level, it is recommended to consult a Ginsberg Gingras professional.”

Interpreting your debt ratio


The following table will help you interpret your debt-to-income ratio:

Excellent : Debt ratio below 30%

Good : Debt ratio between 30% et 36%.

Critical : Debt ratio between 37% and 40%.

Excessive debt : Debt ratio 40% or greater

A 30% debt ratio is considered to be excellent. Once it reaches 40%, the debt ratio is considered risky and your capacity to repay debts could be compromised.

If this is your situation, we strongly recommend you contact a Ginsberg Gingras professional. This meeting will be free and without any obligation on your part. Our objective is to provide you with help.

Common questions about

The debt ratio is a good indicator of financial status, in particular the use of credit. The lower the debt ratio, the better your capacity to pay back loans and control debt levels if something unforeseen arises. Conversely, a high debt-to-income level indicates a precarious, fragile situation.

Consumer debts, such as car loans and mortgages are included in calculating the debt-to-income ratio. In general, it is better to maintain a debt ratio below 40% because daily expenses—groceries, gas, etc.—usually eat up 60% of a budget.

There are two ways to reduce your debt ratio. Either you increase your revenues, or decrease your debts.

To do this, it is suggested you make a budget in order to understand if you have any non-essential expenditures that you can reduce. For example, it may be possible to reduce the cost of your cell phone package. In some cases, the money saved could be used to provide additional amounts so you can pay back debts more quickly, which will improve your debt ratio.

You can also meet with a Ginsberg Gingras licensed insolvency trustee (LIT) for personalized advice that will help you reduce your debt ratio and free yourself from debts. This professional will analyze your financial situation and recommend the solution that best meets your needs. Thanks to these suggestions, you’ll know exactly how to improve your debt ratio and establish a budget that works for you.

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