Definition
Debt-to-Income Ratio
The debt-to-income ratio is the share of your monthly income that goes toward repaying debts, used by lenders to assess loan eligibility.
The debt-to-income (DTI) ratio, sometimes called the FOIR (Fixed Obligation to Income Ratio), measures how much of your monthly income is committed to EMIs and other fixed debt obligations. Lenders use it to judge whether you can afford a new loan.
A lower DTI signals comfortable repayment capacity and improves loan eligibility and terms, while a high ratio suggests you are over-leveraged and may lead to rejection or a smaller sanctioned amount. A common rule of thumb is to keep total EMIs well below half of your take-home pay.
Managing DTI by repaying or consolidating existing debt before applying for a big loan (like a home loan) can meaningfully improve your borrowing prospects and financial resilience.
Related terms
- EMI (Equated Monthly Instalment)An EMI is the fixed monthly payment you make to repay a loan, combining both principal and interest.
- Personal LoanA personal loan is an unsecured loan for any personal need, sanctioned mainly on the basis of your income and credit score.
- Credit Score (CIBIL)A credit score, popularly called a CIBIL score in India, is a 300-900 number that reflects how reliably you repay loans and credit-card dues.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.