Debt-to-Income Ratio
A comparison of total monthly debt payments to monthly income, used by lenders to gauge how much additional debt a borrower can reasonably take on.
Lenders calculate debt-to-income by dividing total monthly debt obligations by monthly income, and a lower ratio generally signals more room to comfortably absorb a new loan payment on top of existing obligations.
For a business owner applying for financing, both personal debt-to-income and the business’s own debt service coverage often get evaluated together, especially when a personal guarantee is part of the loan.
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