# Debt-To-Income Ratio for a Car Loan: How It Works

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

## What Is a Debt-to-Income Ratio?

### Front-End Ratio

### Back-End Ratio

## What Might Auto Lenders Consider When Applying for Car Financing?

**Credit score:**A good credit score score (the FICO credit score model defines that as 670 or higher) makes it easier to get approved and with better car loan terms, including the interest rate and APR (important car loan terms to know).**Debt-to-income ratio:**Different lenders have different DTI guidelines; there’s more information later in this post about what’s considered a good score and what’s considered a high ratio.**Employment history:**Stability in your employment is a good sign to lenders.

## How to Calculate Your Debt-to-Income Ratio for a Car Loan

**Step one:**Determine your monthly gross income. You can use your pay stubs to calculate this, but be sure to use the pre-tax amount. If you get paid weekly, multiply that amount by 52 (weeks of the year) and then divide it by 12 (months of the year).

**Step two:**Make a list of all of your monthly debt payments. This would include:

Rent or your mortgage payment with taxes and insurance Car payments Student loans Personal loans Credit card minimum payments

**Step three:**Calculate the DTI. In the case of the hourly wage earner example above, that would be $1,200 / $3,033 = 39.6%. With the salaried employee, this would be $1,200 / $4,167 = 28.8%.

## What Is Considered a Good DTI Ratio for an Auto Loan?

## What Is a High Debt-to-Income Ratio Auto Loan?

## Lowering Your Debt-to-Income Ratio

Ask for a raise Work overtime Boost your skills and education to qualify for a promotion Work a side gig

## Does Your Debt-to-Income Ratio Have an Affect on Your Credit Score?

*indirect*impact on their credit scores.

The number of loans/credit accounts you have and their types (the “credit mix”) How much of your available credit card limits you’re currently using (your “utilization”) Your payment history, including whether debts are paid on time and in full

## Other Ways to Lower Your Car Financing Payments

No down payment: $653 per month $5,000 down payment: $559 per month $7,000 down payment: $552 per month $10,000 down payment: $466 per month

## The Takeaway

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