LOAN: If the DTI ratio is wrong then the bank can refuse to give a loan, know what is the way to improve it..

Before giving a loan, banks first look at your CIBIL score. CIBIL score tells how the borrower's previous loan repayment history has been. But apart from this, there are many other factors based on which banks decide whether a person should be given a loan or not. One of these is the DTI ratio. DTI means Debt to Income. If this goes wrong, then banks can also refuse to give you a loan. Understand what it is and how it affects you.

DTI tells the customer's ability to repay the loan

Debt-to-income ratio is a measure of the customer's ability to repay the loan. Through this, the customer's loan repayment status is assessed. DTI ratio is calculated every month. For this, the sum of all the loans of the person like home loans, car loans, credit card payments, or any other loan that is already running is taken out and divided by the monthly income. DTI tells whether the financial condition of the loan requester is capable of repaying the loan or not. Based on this, the banks decide whether the loan should be given to the customer or not or how much amount can be given as a loan.

Understand the calculation with an example.

Suppose you earn 80 thousand rupees every month. You already have a home loan and a car loan running. Every month your home loan installment is 28 thousand and your car loan installment is 4 thousand rupees. That is, a total of 32 thousand rupees is deducted from your income every month. In this way, your debt-income ratio is 40%, which is high and it can affect your loan. Your DTI ratio should be less than 36%. The lower the DTI ratio, the better the balance between income and debt. The higher it is, the more difficult it will be for you to get a loan.

How does DTI affect the loan?

When a customer applies for a loan, the bank looks at his salary and credit score, after which it checks the DTI ratio. If your DTI ratio is high and the bank feels that you are not in a position to repay the loan, then despite good income and good credit score, the bank can reject your application due to high liabilities or can object to the loan amount you want.

How to improve this ratio
The way to improve the DTI ratio is to improve your income. If you are in the private sector, you can improve your package by changing jobs or you can increase your income by doing a part-time job. Apart from this, you can also improve your income by doing a separate business. If it is difficult to increase income, then first repay your liabilities. After this, your DTI can improve.

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