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What is DTI, and how to Calculate

DTI stands for Debit to Income Ratio, it is the ratio of total monthly debt repayments to total monthly gross income.


Total Monthly debt include: Home loan, Car loan, Personal loan & Credit card, etc.

Total Monthly income include: Salary, Rental income, Investment, etc.



Banks set DTI to control lending risk, Different banks will have different restrictions on DTI,

Banks also adjust their DTIs with the macroeconomic environment.


The Australian Prudential Regulation Authority (APRA) said that from September, banks will need to include (Buy now Pay later) and (HECS-Help Loans) in the debt calculation when reporting Debt-Income ratio.



In a letter to Authorized Deposit-taking Institutions (ADIs), APRA Chairman Wayne Byres noted that the amendment now states that banks should include higher education student loan "debt" and buy now pay later "debt" in their debt income than report.

He explained that the changes came after last year's industry consultation, when banks raised questions about how they should handle the two debts.


Despite its growing popularity, buy now, pay later has been an outlier in terms of regulation and is not regulated by the National Credit Act like normal debt mechanisms, as providers do not charge interest on repayments.

DTI is the credit limit of all debts held by the borrower and the borrower's gross income (annual pre-tax income as verified by ADI, excluding mandatory pension contributions and any discounts under ADI's Serviceability Assessment Policy) or deduction).




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