| Overview: Debt-to-Income (DTI) ratio is a key measure lenders use to assess your repayment ability. Understanding it helps you manage borrowing smartly, improve loan eligibility, and make informed financial decisions while keeping debt under control. |
About Your Debt-to-Income Ratio for Personal Loans
In India, personal loans are increasingly popular for covering medical bills, education, weddings, and emergencies. Lenders carefully assess a borrower’s repayment capacity, and the Debt-to-Income (DTI) ratio plays a crucial role in this evaluation.
According to Reserve Bank of India (RBI) guidelines, financial institutions consider your income, current debts, and credit history before approving loans.
A lower DTI ratio usually increases approval chances and ensures manageable repayments over time. With flexible loan products available today, understanding your DTI is essential for making cost-effective borrowing choices.
What is DTI and Why it Matters
The DTI ratio compares your total monthly debt obligations to your gross monthly income. It reflects how much of your income is already committed towards debt repayments.
Formula:
DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100
Example:
If your monthly debt payments total ₹25,000 and your income is ₹80,000, your DTI is:
25,000 ÷ 80,000 = 0.3125 × 100 = 31.25%
Why is DTI important for lenders
- Indicates repayment capacity.
- Helps manage lending risks.
- Determines loan eligibility and amount.
- Influences interest rates
Ideal DTI Range in India
Knowing the ideal DTI range helps borrowers assess their financial position before applying for a personal loan.
| DTI Range | Loan Approval Likelihood | Remarks |
| Below 30% | Very high | Strong repayment capacity |
| 30% – 40% | Good | Manageable but may need strong credit |
| 40% – 50% | Moderate | Higher risk, limited loan amounts |
| Above 50% | Low | Loan approval unlikely without corrections |
| Important to Know: A low DTI for a personal loan improves chances of instant approval and better loan offers. |
Factors Affecting Your DTI Ratio
Several financial elements influence your DTI, and understanding them can help you maintain a healthy borrowing profile.
1. Existing Debts
Includes EMIs for home loans, car loans, education loans, and credit card debt.
2. Gross Monthly Income
Higher income reduces DTI if debts remain constant.
3. Loan Tenure
Longer tenure may reduce EMI, improving DTI temporarily.
4. Interest Rates
Lower rates mean smaller EMIs, resulting in a better DTI ratio.
How to Lower Your DTI Ratio
Reducing your DTI can boost loan approval chances and improve long-term financial stability.
- Pay off high-interest debts first.
- Consolidate multiple loans where possible.
- Avoid taking on new debt until the current DTI improves.
- Increase your income through additional sources.
| Mistakes to Avoid: Don’t apply for multiple loans at once; it may increase your DTI and hurt approval chances. You can also follow these debt management tips to reduce liabilities. |
DTI and Personal Loan Approval
Lenders in India, including Airtel Finance’s lending partners, generally prefer applicants with a DTI for personal loans under 40%. While credit score is also important, DTI offers a clearer picture of monthly repayment stress.
Key Points for Approval:
- Strong credit score (preferably 750+).
- Low DTI ratio.
- Stable income source.
- Minimal existing liabilities.
Airtel Finance’s Approach to Personal Loans
Airtel Finance, through Airtel Flexi Credit, offers personal loans up to ₹9,00,000 with:
- Interest rates starting at 12.75%.
- Tenure from 3 to 60 months.
- 100% digital application process.
- Instant approval and disbursal within 24 hours.
Borrowers can adjust EMI and tenure to keep their DTI for personal loans within a healthy range, improving repayment comfort and avoiding financial stress.
Example: DTI Impact on Loan Approval
This example shows how varying DTI ratios can directly influence personal loan approval outcomes.
| Applicant | Monthly Income | Existing EMI | DTI Ratio | Loan Outcome |
| A | ₹70,000 | ₹15,000 | 21.4% | High approval likelihood |
| B | ₹60,000 | ₹25,000 | 41.6% | May face stricter checks |
| C | ₹80,000 | ₹45,000 | 56.2% | Likely to be rejected |
Tips to Keep Your DTI Healthy
Simple, consistent habits can help maintain a manageable DTI and improve borrowing flexibility.
- Keep total EMIs below 40% of income.
- Prepay loans when you have surplus funds.
- Refinance loans for lower EMIs if interest rates drop.
- Avoid lifestyle debt that doesn’t add long-term value.
DTI for Self-Employed Vs Salaried Borrowers
| Aspect | Salaried Borrower | Self-Employed Borrower |
| Income Stability | Fixed monthly salary | Variable income |
| DTI Impact | Easier to calculate | May need income averaging |
| Documentation | Salary slips, bank statements | ITRs, business statements |
| Loan Approval | Generally smoother if DTI is low | May require more proof of income stability |
Keep Your DTI in Check and Borrow Smart
The debt-to-income ratio is one of the most important factors in determining whether your personal loan application will be approved. By maintaining a low DTI, you not only enhance your eligibility but also secure better terms and manageable EMIs. Airtel Finance’s personalised Flexi Credit offering, with flexible EMIs and competitive rates, is designed to help you borrow responsibly while keeping your DTI in check.
FAQs
How is the DTI ratio calculated?
The DTI ratio is calculated by dividing monthly debt payments by gross monthly income, then multiplying by 100.
Does a low DTI guarantee personal loan approval?
No, lenders also consider credit score, income stability, and other eligibility factors besides DTI ratio.
Can increasing income lower my DTI ratio?
Yes, increasing income while keeping debt constant reduces your DTI ratio, improving loan eligibility.
How can I quickly reduce my DTI ratio?
Pay off high-interest debts, avoid new loans, and consolidate EMIs to reduce the DTI ratio.
Why do lenders check DTI for personal loans?
Lenders use the DTI ratio to assess repayment capacity and minimise risks before approving personal loans.
