How to Get a Loan If You Have High Debt-to-Income Ratio

Applying for a loan can be challenging, particularly if a significant share of your income already goes toward debt. Lenders evaluate your debt-to-income (DTI) ratio to measure repayment capacity, and a high DTI may limit your borrowing options. However, it does not automatically disqualify you. Understanding how lenders interpret your DTI and reviewing strategies to lower it can strengthen your position when seeking credit.

A financial advisor can work with you to evaluate your spending and create a budget to help manage your debt.

What Classifies as a High Debt-to-Income Ratio?

Lenders use debt-to-income (DTI) ratio to evaluate your ability to manage monthly payments and repay debts. It shows how much of your gross monthly income goes toward paying debts. This includes debts like mortgages, student loans, auto loans and credit cards. The lower your DTI, the more flexibility you have to take on additional credit, since lenders see less of your income as already committed to obligations.

While each lender sets its own standards, they generally considered a DTI above 36% a sign of financial strain. That means more than a third of your monthly income is already earmarked for debt payments. Once DTI rises above 43%, it typically crosses into the territory that many lenders classify as “high risk.” This threshold often determines whether you can qualify for a traditional mortgage or other large loan.

From a lender’s perspective, a borrower with a high DTI won’t be able to weather unexpected financial changes. The more income you use for recurring obligations, the greater the chance you could fall behind on new loan payments. This is why lenders often set maximum DTI limits. This protects their own interests but also reduces the risk of borrowers becoming overextended.

How to Calculate Your DTI Ratio

Your debt-to-income ratio (DTI) shows how much of your monthly income goes toward paying debts.

Calculating your debt-to-income ratio (DTI) is straightforward once you understand the formula:

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

You start by adding together all of your monthly debt payments. This includes obligations like your mortgage or rent and any other recurring payments, like car loans or credit card minimums. You then divide that total by your gross monthly income, which is the amount you earn before taxes and deductions.

For example, say your monthly debt payments add up to $2,000. If your gross monthly income is $6,000, your DTI ratio would be 33%. That means one-third of your income is being used to cover debt each month. Lenders often look at this percentage to gauge whether you’re in a manageable range or edging into riskier territory.

It’s important to use accurate numbers when calculating your DTI. Overlooking smaller obligations like personal loans or credit card balances can give you a false sense of security. Having a precise calculation ensures you know where you stand in relation to lender benchmarks. This information can help you prepare for the loan application process more effectively.

Ways to Get a Loan With a High DTI Ratio

It’s worth noting that high DTI doesn’t always mean a loan is out of reach. Some lenders may be willing to approve applications if other parts of your financial profile are strong, such as a high credit score, steady employment, or significant cash reserves. Government-backed loan programs, like FHA mortgages, may also allow higher DTIs compared with conventional lenders. Still, borrowers in these situations often face higher interest rates or stricter terms.

If your DTI alone makes approval difficult, applying with a co-signer can be a strategic move. A co-signer with strong credit and a lower debt ratio can balance out your application, giving lenders more confidence. Keep in mind, however, that your co-signer is equally responsible for the debt, so it’s a step that requires trust and open communication.

Not all lenders evaluate applications in the same way. Credit unions, community banks and online lenders may have more flexible criteria when compared with larger, traditional institutions. Taking the time to compare offers and find a lender that specializes in borrowers with higher DTIs can make the difference between approval and rejection.

While finding a lender willing to work with your current DTI is important, it’s also smart to focus on lowering that ratio over time. Paying down high-interest debt, consolidating loans, or increasing income can put you in a stronger position for future borrowing. A financial advisor can help you build a strategy that balances your immediate needs with your long-term goals.

Tips for Borrowing Money With a High DTI Ratio

Borrowing money when you already have a high debt-to-income (DTI) ratio can feel challenging, but it isn’t impossible. Below are some practical tips to help you improve your odds of approval and secure more favorable terms.

Boost your credit score: Lenders often weigh credit history as heavily as DTI. By paying bills on time, reducing credit card balances, and avoiding new debt, you can raise your score and offset concerns. A stronger credit score signals you’re a responsible borrower, even if your income is stretched.
Offer a larger down payment: Putting more money down reduces the lender’s risk. A larger upfront payment also shows commitment and financial discipline, both of which can make lenders more willing to approve your application despite a high DTI.
Choose a shorter loan term: While shorter loan terms come with higher monthly payments, they often carry lower interest rates and cost less overall. Lenders may see this as a safer option because you’ll repay the debt more quickly, which can work in your favor when your DTI is high.
Highlight stable income or assets: If you have consistent employment, multiple income streams, or significant savings, make sure to document and present these strengths. Demonstrating that you have resources beyond your DTI can reassure lenders that you’re financially resilient.
Consider debt consolidation before applying: Streamlining multiple debts into a single loan with a lower interest rate can reduce your monthly obligations and improve your DTI ratio. Even small improvements from debt consolidation can make a difference in how your application is viewed.

Bottom Line

Getting a loan with a high debt-to-income ratio can be challenging, but improving your finances and understanding lender requirements can increase your chances of approval.

Getting approved for a loan with a high DTI ratio can be challenging, but not impossible. Knowing how lenders assess DTI, tracking your own ratio, and lowering existing debt can make a difference. You can also look into loan programs designed for higher-DTI borrowers or work with a financial advisor to improve your credit and cash flow. Careful preparation and steady progress can help you qualify for financing while strengthening your overall financial position.

Tips for Financial Planning

A financial advisor can help you analyze your DTI, create a debt reduction plan and identify strategies to improve your credit profile before applying for a loan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you want to build your savings up consistently, consider setting up automatic transfers from your checking to your savings accounts. This approach could help you make saving a routine part of your financial life.