Before applying for a personal loan, the most important question isn't "Will I be approved?"—it's "Can I comfortably afford the payments?" This calculator uses your Debt Service Ratio (DSR), also known as Debt-to-Income ratio (DTI), to estimate how much additional monthly debt payment fits within your budget without overextending your finances.

Lenders use DSR as a key metric to assess loan affordability. It measures what percentage of your gross income goes toward debt payments. A DSR of 30% means 30 cents of every dollar you earn goes to debt. While lenders have their own thresholds, understanding your DSR helps you borrow responsibly—not just what you qualify for, but what you can genuinely afford.

This calculator goes beyond simple math. It shows your current DSR, calculates how much room you have for new debt payments, converts that payment capacity into an estimated loan amount, and lets you test specific loan scenarios against your budget. Whether you're planning a debt consolidation, home improvement, or major purchase, these numbers help you borrow with confidence.

Remember: just because you can borrow doesn't mean you should. This tool helps you find the sweet spot between borrowing power and financial comfort.

What Is DSR/DTI?

Debt Service Ratio (DSR) and Debt-to-Income (DTI)are essentially the same metric: the percentage of your gross monthly income that goes toward debt payments. The formula is simple:

Example: $5,000 monthly income, $1,500 in debt payments = 30% DSR.

What Counts as "Debt Payments"?

Typically includes: mortgage/rent, car loans, student loans, credit card minimum payments, personal loans, child support/alimony, and other recurring debt obligations. It usually excludes: utilities, insurance, groceries, and discretionary spending.

Common DSR Thresholds

• Under 20%: Excellent—very low debt burden
• 20-35%: Good—comfortable and typically acceptable to lenders
• 36-43%: Moderate—approaching limits; some lenders cautious
• Over 43%: High—may struggle to qualify; financial stress likely

Front-End vs. Back-End DTI

Front-end DTI: Housing costs only (mortgage/rent) as percentage of income. Often capped at 28-31%. Back-end DTI: All debt payments including housing. Often capped at 36-43%. This calculator focuses on back-end (total) DTI for personal loan affordability.

Why Gross Income Is Used

Lenders use gross (pre-tax) income because it's a standardized measure. Your take-home pay varies based on tax situation, deductions, and benefits. For personal budgeting, you might prefer using net income—but know that lender calculations use gross.

Step 1: Enter Your Income

Input your gross monthly income (before taxes). If you earn annually, divide by 12. Include all reliable income sources: salary, regular bonuses, freelance income, rental income, etc. Be conservative—don't include variable income you can't count on.

Step 2: List Your Existing Debts

Add all current monthly debt payments: mortgage/rent, car loans, student loans, credit card minimums, existing personal loans, and other debt obligations. Be thorough—missing debts will make your results inaccurate.

Step 3: Set Your Target and Maximum DSR

Target DSR: Your comfortable debt level (e.g., 30%)—what feels manageable without stress. Max DSR: Your absolute ceiling (e.g., 40%)— the point beyond which you'd feel overextended. The calculator shows affordability at both levels.

Step 4: Enter Loan Assumptions

Input an assumed APR and loan term. These affect how much loan amount your payment capacity translates into. Higher rates or shorter terms = lower max loan for the same monthly payment.

Step 5: Test a Specific Loan (Optional)

If you have a specific loan in mind, enable the "Proposed Loan" section and enter the amount, rate, and term. The calculator shows how this loan would affect your DSR.

Step 6: Review Your Affordability Snapshot

See your current DSR, room for additional payments, estimated max loan amounts at target and max DSR, and how a proposed loan fits your budget. Use these insights to borrow within your means.

Calculating Current DSR

Example: $1,200 monthly debts on $5,000 income = 24% DSR.

Calculating Payment Capacity

Your room for additional debt payments is the gap between current DSR and target DSR:

Example: Target 30%, current 24%, income $5,000. Capacity = (30% - 24%) × $5,000 = $300/month.

Converting Payment Capacity to Loan Amount

Given a monthly payment capacity, the maximum loan amount is calculated using the standard loan formula in reverse:

Where r = monthly rate, n = total payments. Example: $300/month capacity at 10% APR for 3 years (36 months) = ~$9,300 max loan amount.

How Rate and Term Affect Max Loan

The same $300/month payment capacity yields different loan amounts:

• 10% APR, 3 years: ~$9,300
• 10% APR, 5 years: ~$14,200
• 15% APR, 3 years: ~$8,600
• 8% APR, 5 years: ~$14,800

Lower rates and longer terms increase your borrowing power for the same monthly payment.

Scenario 1: First-Time Borrower

Situation: Alex earns $4,500/month with only a $350 car payment. Current DSR: 7.8%. Target: 25%. Max: 35%.

Analysis: Payment capacity at target: (25% - 7.8%) × $4,500 = $774/month. At 12% APR for 3 years, that supports a ~$22,000 loan. At max DSR: ~$35,000.

Strategy: Alex has significant borrowing capacity. Even a $15,000 loan at $500/month keeps DSR under 19%—very comfortable.

Scenario 2: Already Carrying Debt

Situation: Maria earns $6,000/month with $1,800 in existing debts (mortgage, car, student loans). Current DSR: 30%. Target: 35%. Max: 40%.

Analysis: Payment capacity at target: (35% - 30%) × $6,000 = $300/month. At 10% APR for 5 years, that supports a ~$14,000 loan. Room is limited.

Strategy: Maria should consider if the loan is necessary. A $10,000 loan at $212/month keeps her at 33.5% DSR—manageable but tight.

Scenario 3: Debt Consolidation Planning

Situation: James has $15,000 in credit card debt across 3 cards ($450 total minimum payments at ~22% APR). Income: $5,500/month. Other debts: $800. Current DSR: 22.7%.

Analysis: A $15,000 consolidation loan at 12% for 4 years = $395/month. This actually lowers his monthly debt payments by $55 while paying off faster. New DSR: 21.7%.

Strategy: Consolidation makes sense here—lower payments, lower rate, and improved DSR. James should close the credit cards after consolidating to avoid running up new debt.

Scenario 4: Home Improvement Financing

Situation: The Patels earn $9,000/month combined with $2,200 in debts. Current DSR: 24.4%. They need $25,000 for a kitchen renovation.

Analysis: $25,000 at 11% for 5 years = $544/month. New DSR: 30.5%— within most lenders' comfort zone and the Patels' 35% target.

Strategy: The loan is affordable. However, they should consider if a HELOC might offer a lower rate (since they have home equity) before committing to a personal loan.

Scenario 5: Overextended Warning

Situation: Kevin earns $4,000/month with $1,600 in existing debt payments. Current DSR: 40%. He wants a $10,000 loan.

Analysis: Kevin's DSR is already at the danger zone. A $10,000 loan at 15% for 3 years adds $347/month, pushing DSR to 48.7%.

Strategy: This loan would be risky. Kevin should focus on paying down existing debt first. If the loan is essential, a longer term reduces monthly impact, but he'd still be overextended.

• ❌ Borrowing the maximum you qualify for: Lenders may approve loans at 43%+ DSR, but that doesn't mean you can comfortably afford them. Borrow what you need, not the maximum offered.
• ❌ Forgetting about other financial goals: DSR only measures debt vs. income. It doesn't account for retirement savings, emergency funds, or other priorities. A "safe" DSR might still crowd out important savings.
• ❌ Using net income instead of gross: Lenders calculate DSR using gross income. If you use net income for your personal calculation, your DSR will appear higher than what lenders see—but using gross may make you overconfident about affordability.
• ❌ Overlooking variable income: If your income fluctuates (commissions, freelance, seasonal work), base your calculation on your lowest reliable income, not best months. This protects you during lean periods.
• ❌ Not counting all debts: Missing a student loan, subscription with financing, or other obligation underestimates your true DSR. Be thorough when listing existing debts.
• ❌ Ignoring interest rate impact: A 5% rate difference on a $20,000 loan changes your monthly payment by $50+. Shop for the best rate before assuming affordability.
• ❌ Assuming approval means affordability: Lenders profit from loans; their approval doesn't mean the loan is in your best interest. Do your own affordability analysis.

1. Pay Down Existing Debt First

Every dollar of monthly debt payment you eliminate increases your capacity for new debt. If you can pay off a $200/month credit card before applying for a personal loan, that's $200 more in monthly capacity.

2. Improve Your Rate to Increase Borrowing Power

Better credit = lower rates = more loan amount for the same monthly payment. If you can improve your credit score before borrowing, you'll get more favorable terms and greater affordability.

3. Consider a Longer Term for Lower Payments

Extending the loan term reduces monthly payments (and DSR impact). Trade-off: you'll pay more total interest. Use this strategy when cash flow is the priority, but be aware of the total cost.

4. Use a Co-signer or Joint Application

Adding a co-borrower's income to the application effectively lowers the DSR calculation. This can help with approval and potentially better rates—but both parties are equally liable for repayment.

5. Document All Income Sources

Side income, rental income, and other sources can increase your gross income for DSR purposes—if you can document them (tax returns, bank statements). Don't leave money on the table.

6. Compare Multiple Lenders

Different lenders have different DSR thresholds and rate offerings. A lender rejecting you at 38% DSR doesn't mean another won't approve. Shop around, especially with credit unions and online lenders.

7. Build a Buffer Into Your Budget

Even if a loan "fits" your target DSR, ensure you have monthly buffer for unexpected expenses. A loan that pushes you to exactly 35% DSR leaves no room for financial surprises. Aim lower than your maximum comfort level.