At its simplest, your debt-to-income ratio is how much money you owe versus how much money you make. You can calculate this ratio by adding up all your monthly debt and dividing it by your gross (pre-tax) monthly income. Regardless of the loan purpose, just about any personal loans lender will use this formula at some point, along with your other liquid assets such as the contents of your checking account or savings account, to evaluate your credit history and how likely you are to be able to repay the loan. Most major lenders may decline to underwrite a loan if the debt-to-income ratio exceeds 43%. Let’s compare two women with similar incomes to see how this might work in practice. Sarah has a stable job with a gross monthly income of $10,000 and excellent credit. She pays $720 per month on a 15year fixed-rate mortgage refinance for her home, $450 per month for her auto loan payment and full coverage from her car insurers, and $116.67 per month for her home insurance. She has a current student loan refinance program for her private student loans, on which she pays $500 per month. She’s also paying credit card debt consolidation loans at a total rate of $375 per month. Finally, she has a Roth IRA to which she contributes $300 per month for retirement planning, health insurance at $400 per month, and a term life insurance policy on which she pays $75 a month because she’s young, in good health, and a nonsmoker. Thus, Sarah’s debt-to-income ratio would be $2936.67 divided by $10,000, which works out to roughly a 29.37% debt-to-income ratio. Thus, on paper, Sarah’s credit profile says she is very likely to be able to handle having another loan to pay. If she has money set aside in savings for emergencies, as well as a stable base balance in her checking account, Sarah is likely to have a large loan option range and will likely qualify for special financing that’s subject to credit approval on just about any type of personal loans, such as a home improvement loan with a 30year fixed rate. Meanwhile, Erica also makes $10,000 a month, but her credit profile is very different than Sarah’s. Erica is paying off a heavy medical debt at $750 per month, paying for car insurance at $200 a month, and renting an apartment for $1800 per month. While she doesn’t have student loan debt, she does have quite a bit of balance transfer activity from high-interest credit cards to cards with lower interest and cashback, which she’s working to pay off at $500 per month. She is also servicing debt for business loans at $800 per month, plus her medical and life insurance, which costs her another $300 per month. Erica’s debt-to-income ratio is $4350 divided by $10,000, or 43.5%. While Erica has fair credit, she has no money in savings and no financial cushion for emergencies, which would make her less attractive to mortgage lenders or to get a personal loan for emergency medical costs from major lenders because hard and soft credit checks may suggest she doesn’t meet their minimum credit rating. This might mean she needs to consider alternatives to medical loans from a major lender to access a loan for medical expenses if she needs it. The debt-to-income ratio is only one of the data points affecting your credit score that influence lender ratings during application processing, but it is a very important one. If possible, you may want to see if you can convert any outstanding debts to lower-rate loans for debt consolidation, refinancing existing medical loans for bad credit, or shopping around to compare rates between lenders who might offer lower mortgage rates than you’re currently paying. Some companies even offer monthly autopay discounts or a discount for having or buying other products or services, helping you shave small but crucial points off your debt-to-income ratio and making you a more attractive borrower to major lenders. Of course, you can also use United Medical Credit’s easy personal loan calculator to get a sense of how much you can expect to pay—and how much easier it can be to access the medical procedure or dental loans you and your family need, often in as little as one business day!