1. What is a PTI Ratio Calculator?

Definition: This calculator computes the Payment-to-Income ratio (PTI), which measures what portion of income is used for payments.

Purpose: It helps individuals and financial institutions assess debt burden and financial health.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( PTI \) — Payment-to-income ratio (dimensionless)
• \( P \) — Payment amount (currency, e.g., USD)
• \( I \) — Income amount (currency, e.g., USD)

Explanation: The payment amount is divided by the income amount to determine what percentage of income goes toward payments.

3. Importance of PTI Ratio

Details: Lenders typically prefer PTI ratios below 0.35 (35%). Higher ratios may indicate financial stress.

4. Using the Calculator

Tips: Enter the payment amount and income amount in the same currency (e.g., USD). Both values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What is a good PTI ratio?
A: Generally, ratios below 0.35 (35%) are considered manageable, while ratios above 0.43 (43%) may be problematic.

Q2: Should I include taxes in income?
A: Typically use gross income (before taxes) for standard PTI calculations, unless specified otherwise.

Q3: What payments should be included?
A: Include all recurring debt payments (mortgage, car loans, credit cards) but exclude living expenses.

Q4: How often should I calculate my PTI?
A: Recalculate whenever your income or payment obligations change significantly.

Q5: Can PTI be greater than 1?
A: Yes, if payments exceed income (PTI > 1 or 100%), this indicates serious financial distress.