Debt-to-income ratio (DTI)

Your monthly debt payments divided by your monthly income before taxes.

DTI compares what you owe each month (rent or mortgage, car loan, minimum card payments, student loans) with your gross monthly income. If your debt payments are $1,500 and you earn $5,000 before taxes, your DTI is 30%.

Lenders use it to decide whether you can take on a new loan. A lower DTI generally means more breathing room in your budget.