Divide your total income amount by your total debt amount – and you have your

debt ratio

. Whenever you apply for a loan the bank wants to be sure you have enough income to pay the borrowed amount back. There is a number of tools that banks and other lenders use to estimate your credibility, and calculating your

debt ratio

is one of them. They have to make sure your total debt doesn’t exceed a certain required percentage of your income. The banks usually require this percentage as 36-42. This percentage is the