Eureka Leasing Debt to income ratios

A guide to your debt to income (DTI) ratio


Before applying for a car lease, there are several things you should do. Most of us are aware of the need to check our credit reports regularly, but how often do you check your debt to income ratio? Few realise that your debt to income ratio can have a significant impact on your car lease application.

 

What is my debt to income ratio (DTI)?

Your debt to income ratio is a numerical figure that shows a comparison between how much you earn and how much debt you pay each month. It indicates to lenders how much of your income gets spent on debt repayments and helps them to determine whether you have the capacity to take on more credit.


“Keep your debt to income ratio below 36% where possible to increase your creditworthiness.”

How do I calculate my debt to income ratio?

To calculate your debt to income ratio, add up all your monthly debt repayments – including mortgage commitments, car loans or leases, minimum payments on credit cards, student loans, and any other obligations – and divide this figure by your gross monthly income.

For example, you pay:

  • £500 mortgage payment each month
  • £100 credit card payment
  • £200 student loan payment

And you earn:

  • £3000 a month

To calculate your debt to income ratio:

  • £800 debt payments divided by £3000 income = 0.26 or 26%

“A high debt to income ratio may imply your debt is out of control, causing car leasing companies to see you as a financial risk.”

How does my debt to income ratio affect car leasing applications?

A high debt to income ratio may cause car leasing companies to reject your application amid fears that you will struggle to meet monthly rentals. It is generally advised that you keep your debt to income ratio below 36%, although some companies create their own threshold for customers to meet. The lower your debt to income ratio, the more likely you are to secure the best car lease deals.

 

At Eureka, we understand that your situation can change; an ability to pay at one time does not necessarily mean you cannot pay now. So, if you have bad credit and have been refused a car lease, get in touch to see if we can help you secure a brand new lease car.

At Eureka, we tailor our car lease deals to your personal circumstances.

Get in touch

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