Importance of DTI: Debt to income ratio is an important factor for banks and other lending agencies to decide the credit limit, which they can extend safely to any person. This parameter varies for different agencies as per their lending policy, but most commonly it is 36 percent for various banks and lending agencies. You should be well aware of your debt to income ratio to be confident, whenever you are applying for new loans or advances with some bank or other lending agency.
Methods to lower DTI: If a person has higher debt to income ratio he will certainly like to reduce it to the level desired by lending agencies, so that he may avail new loan or advance when he is in real and urgent need. Following are a few measures which one may take to achieve it.
- Don’t take any more loans and avoid purchasing much from your credit card. This will reduce your debt to income ratio.
- Try to increase your monthly amount, which you are paying towards your loans. The extra amount thus paid will lower your overall debts quickly.
- Large purchases may be postponed for future, and money saved thus may be utilized to make larger down payments. By postponing large purchases and by making fewer purchases you will be able to reduce your monthly burden of repayments and by doing this you will lower your debt to income ratio.
- Keep a close watch on your debt to income ratio by calculating it every month. Watch the downward progress of your debt to income ratio, and get inspired by its movement.
By adopting the above guidelines, if you are able to keep your debt to income ratio low, it will certainly help to manage your monthly repayments towards the loans taken by you. And if your debt liabilities are under control you will feel more relaxed, and you may enjoy more peace of mind. Moreover, it will help you in qualifying for some really needed future planning while applying for accrediting in some bank or other lending agency.