Lowering your Debt to Income Ratio

Your debt to income (DIT) ratio is important factor when you are trying to purchase a home or get approved for a loan. Debt to income ratio gives lenders an idea about much of your money goes towards your debt. A debt to income ratio of 50% is considered high. Having a DIT at this amount means that 50% of your income goes toward paying off debt. Thankfully you have the opportunity to lower your DIT ratio with a few simple steps.


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Increase your income
Working extra hours or getting a part-time job is a great way to decrease your DIT ratio. The more income you make the more your DIT ratio will decrease.

Increase your monthly paymentsFor individuals that do not have the time to work more hours or to get a part-time job, you are able to reduce your DIT ratio by paying more on your premium. This can be achieved by increasing your monthly payments. Individuals that have taken the initiative to make more income can also benefit from this step, allowing them to decrease their DIT more and at a quicker rate.

Avoid getting more debt
This is an important step with lowering your DIT. Obtaining more debt will cause your DIT ratio to increase even further and make whatever progress you have made to be in vain.

Know your progress
Each month you should take an assessment of you DIT ratio to know exactly where you stand. This will allow you to see that you are making some type of progress. In order to calculate your DIT ratio you will first add up all of your monthly debts then divide them by your gross monthly income.

Your DIT ratio is important because it can cause you to be approved or rejected for a loan. In order to increase your chances of getting approved make sure to follow the steps given above.

Gina Wilson

Another post from Gina Wilson – Credit & Loans Specialist Blogger.