Comprehensive Debt Ratios Calculator
Assess your financial health by calculating key debt metrics in one place
Financial Disclaimer: This tool provides general financial analysis only and should not be considered professional financial advice. Consult with a qualified financial advisor before making any significant financial decisions.
Tip: Complete all relevant sections for a comprehensive debt analysis.
Income Information
Debt Obligations
Housing Costs
Debt Analysis Summary
Debt-to-Income Ratio (DTI):
Housing Expense Ratio:
Debt Service Coverage Ratio (DSCR):
0.00%
0.00%
0.00
Debt-to-Assets Ratio:
Debt-to-Equity Ratio:
0.00%
0.00%
Financial Health Assessment: Good
Recommendations:
- Consider paying down high-interest debts first
- Maintain DTI below 36% for optimal financial health
Understanding Debt Ratios: Key to Financial Health
Personal Finance
- DTI under 36% is generally considered healthy
- Housing costs should be ≤28% of gross income
- Total debt payments should be ≤36% of income
Business Finance
- DSCR >1.25 is typically required for loans
- Debt-to-equity ratios vary by industry
- Lower leverage ratios reduce financial risk
"Businesses maintaining DSCR above 1.5 have 40% lower default rates according to Federal Reserve data."
Interpreting Your Debt Ratios
Debt-to-Income (DTI)
Measures your monthly debt payments against gross income. Lenders prefer DTI below 36%, with no more than 28% going toward housing. A DTI above 43% may make it difficult to qualify for mortgages.
Debt Service Coverage (DSCR)
Indicates a business's ability to pay debt obligations with operating income. A ratio of 1 means income equals debt payments. Most lenders require minimum DSCR of 1.25 for commercial loans.
Leverage Ratios
Show the proportion of debt used to finance assets. Acceptable levels vary by industry - manufacturing often has higher ratios than service businesses. Lower ratios generally indicate less financial risk.
Important: These ratios are just one component of financial health. Lenders also consider credit history, cash reserves, and other factors when evaluating applications.
Frequently Asked Questions
What's the difference between front-end and back-end DTI?
Front-end DTI only includes housing costs (mortgage/rent, taxes, insurance), while back-end DTI includes all recurring debt payments (credit cards, car loans, student loans, etc.). Lenders typically look at both ratios when evaluating mortgage applications.
Why does my DSCR matter to lenders?
DSCR measures your ability to generate enough cash flow to cover debt payments. Lenders want assurance that even if your income fluctuates, you'll still have sufficient funds to make payments. Higher DSCR indicates lower risk for the lender.
How can I improve my debt ratios?
You can improve ratios by increasing income (raise, side job), paying down debt, or a combination. For businesses, increasing revenue or decreasing expenses improves DSCR. Avoid taking on new debt while trying to improve ratios.
Are there industry-specific debt ratio benchmarks?
Yes, acceptable ratios vary significantly by industry. Capital-intensive industries (manufacturing, telecom) typically have higher leverage ratios than service businesses. Research your specific industry benchmarks for meaningful comparison.
Should I include utilities in my housing ratio?
Standard housing ratios (front-end DTI) typically don't include utilities. However, some lenders may consider them in special circumstances. When calculating for personal use, including utilities can give you a more complete picture of housing affordability.