Debt-to-income Ratio Definition

In personal finances, the debt-to-income ratio describes the amount of debt relative to the amount of income. The mathematical term is important to potential creditors as it describes how likely a potential borrower is to be able to make regular payments on the debt. Individuals with a low DTI ratio have little debt compared to their income whereas individuals with a high DTI have large amounts of debt compared to their income. Note that since the term is a simple ratio, the actual amount of income and debt are not considered. That is, a person may make only $20,000 per year but have a low DTI ratio while another person may make $1,200,000 per year but have a high DTI ratio.