Debt-to-Income Ratio (DTI)

A term denoting the debt-to-income ratio (DTI), which indicates the percentage of a consumer's monthly gross income allocated to debt repayment. The DTI ratio is used by banks and financial institutions to assess the creditworthiness of individuals and households when granting loans. It reflects the portion of a person’s monthly income devoted to servicing existing debt, including principal and interest on loans, lease payments, and other financial obligations. A higher DTI indicates greater risk for the lender, while a lower DTI reflects stronger financial stability of the borrower.