Help and advice - Auto insurance - Life insurance

How to calculate your debt ratio?


In a few words it is a financial unit of measure used to compare the total amount (disposable income) you own after being deducted your tax dollars and assessment and the total amount of your debts.

Financial institutions rely on this te measure and evaluate your reimbursement capacity, in other words, your solvency.

The formula to calculate your debt ratio and secure your car loan.

The rule is pretty simple:

  • Add all regular payments, your monthly spendings (rent, condo fees, home insurance, taxes, mortgage and others…)
  • Divide that amount by you gross monthly income, including your placements and potential rents.

You will then obtain a number in % that can be read like this:

  • 30% or less: your ratio is great!
  • 30% to 36%: You ratio is ok
  • Between 36% and 40%: average or at risk
  • More than 40% You ratio can put you in a difficult situation to obtain a car loan.


  • Do not mix up debt ratio and credit rating: Your credit file measures your credit history and your debt ratio takes in account your present income. Both are taken into consideration by the financial institution managing your financing application.
  • The following spendings are not considered as debt generating and should not be taken into account when calculating your debt ratio: phone, electricity, gas, transports (all public services) or food.

In any case, the good news is that Crédit Auto Go will help you no matter your financial situation, your credit file or debt ratio. We have helped clients in good financial health but also clients that were bankrupted for a financing application in 1st, 2nd or 3rd chance credit. Please contact us to discuss you project or send us a financing application. We will get back to you as soon as possible!

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