Total debt ratio
Certified Financial Planner glossary · Certified Financial Planner
Definition
A cash-flow benchmark comparing all recurring debt payments to gross income.
Total debt ratio in plain English
A cash-flow review counts the mortgage but forgets the auto lease and the HELOC minimum the stem still lists as monthly obligations. Total debt ratio compares all recurring debt payments to gross income. Excluding a payment the facts still count is an ignored constraint, and it makes the household look safer than it really is. Add every recurring debt service line included in the vignette before you judge affordability or approve clearing another loan.
Practice Total debt ratio
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