This article illustrates how to make debt to income (DTI) ratio calculator in excel. Lenders use the debt to income ratio to determine whether a person is capable of repaying a certain loan or not. You can easily make a debt-to-income ratio calculator in excel if you need to do this very often. Follow the article to learn how to do that.

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## Download Debt to Income Ratio Calculator

You can download the debt-to-income ratio calculator template for free from the download button below.

## What Is Debt to Income Ratio?

The debt to income ratio is simply the ratio of the total monthly debts of a person to his/her total monthly income. It is usually expressed in percentages.

Assume Mr. Smith has a total recurring monthly debt of $2500. On the other hand, his gross monthly income is $7500. Then you can calculate his debt to income ratio as follows.

There are mainly two types of debt-to-income ratios:

- The front-end,
- And the back-end

**The front-end debt to income ratio** signifies the percentage of your salary that can be expensed to repay the housing expenses.

On the other hand, **the back-end debt to income ratio** indicates the percentage of salary that can be expensed to repay all of your monthly recurring debts.

Lenders usually follow the debt to income ratio of 28/36 to decide whether to allow a borrower a loan or not. They use this ratio to determine the capability of the borrower to repay the loan. Here, the norm is that 28% of your salary can be expensed to repay the housing-related debts. This is usually the front-end debt to income ratio. On the other hand, 36% of your salary can be used to meet all of the recurring debt payments. Therefore, it is the back-end debt to income ratio.

The higher the debt to income ratio is, the more likely you will face difficulty to repay the loan. A debt to income ratio of 28% or less is generally preferable. But for those with a steady income, a healthy debt may have a debt to income ratio of up to 35%. If the debt to income ratio reaches 43-50%, you should think about reducing your debts by paying off some of your loans. Do not let your debt to income ratio go over 50%. Otherwise, you will almost certainly fall into financial difficulty.

Lenders are now more flexible on this historical 28/36 limit as housing costs and all other prices are much higher. They may allow you a loan even if your debt to income ratio is more than 50%. But you have to pay higher interest than others.

## Steps to Make a Debt to Income Ratio Calculator in Excel

Follow the steps below to make a debt-to-income ratio calculator in excel.

### đź“Ś Step 1: Calculate Total Recurring Monthly Debt

- First, make a list of all recurring monthly debts and enter the corresponding amounts. Then apply the following formula in cell
**D12**to calculate the total recurring monthly debt.

`=SUM(D6:D11)`

**Read More: ****Debt Service Coverage Ratio Formula in Excel**

### đź“Ś Step 2: Input Gross Monthly Income

- Next, you need to input your gross monthly income. If you have multiple sources of income, then make a list of them. After that, enter the following formula in cell
**H12**to get the gross monthly income.

`=SUM(H6:H11)`

**Read More: ****How to Calculate Current Portion Of Long Term Debt in Excel**

**Similar Readings**

**How to Calculate Cost of Debt in Excel (3 Simple Ways)****How to Make Credit Card Debt Reduction Calculator for Excel****How to Use Debt to Equity Ratio Formula in Excel (3 Examples)**

### đź“Ś Step 3: Calculate Debt to Income Ratio

- Now, apply the following formula in cell
**D14**to calculate the debt to income ratio. Then, apply the**Percentage**(%) cell format.

`=D12/H12`

- Then, enter the following formula in cell
**F14**to show remarks based on the DTI ratio.

`=IF(D14<=0.28,"Healthy Debt","Reduce Your Debts!")`

You can apply Conditional Formatting to make the final result and interpretation look good. To do that-

- Select cell
**F14**. Then go to**Conditional Formatting**from the**Home**tab and select**New Rule**.

- Next, select â€ś
**Use a formula to determine which cells to format**â€ť. After that, enter the following formula as the rule description. Then, click on**Format**.

`=D14<=0.28`

- Next, choose the green color from the
**Fill**tab and click**OK.**

- Click
**Ok**again after that.

- Then, apply
**conditional formatting**to show a different color if the DTI ratio is greater than 0.28. Finally, you will see the following result.

## Things to Remember

- Donâ€™t forget to apply the
**Percentage**(%) format to get the DTI ratio in percentages. - You can apply multiple conditional formatting in the cells to show different colors based on the DTI ratio.

## Conclusion

Now you know how to make a debt to income ratio calculator in excel. Do you have any further queries or suggestions? Please let us know in the comment section below. You can also visit our **ExcelDemy** blog to explore more about excel. Stay with us and keep learning.