Total Debt Service Ratio

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Definition of 'Total Debt Service Ratio'

The total debt service ratio (TDSR) is a measure of how much of your income is used to pay your debts. It is calculated by adding up all of your monthly debt payments, including your mortgage, car payments, student loans, and credit card payments, and dividing that number by your gross monthly income.

The TDSR is used by lenders to determine how much debt you can afford to take on. A higher TDSR means that you have less money available to make other payments, such as savings or investments. This can make it more difficult to qualify for a loan or to get a lower interest rate.

The TDSR is typically expressed as a percentage. For example, if your monthly debt payments total $2,000 and your gross monthly income is $5,000, your TDSR would be 40%.

The TDSR is an important tool for lenders, but it is also important for borrowers to understand. By knowing your TDSR, you can make informed decisions about how much debt you can afford to take on.

Here are some additional things to keep in mind about the TDSR:

* The TDSR is not the only factor that lenders consider when making lending decisions. They will also look at your credit score, your debt-to-income ratio (DTI), and your assets.
* The TDSR can vary depending on the type of loan you are applying for. For example, the TDSR for a mortgage is typically higher than the TDSR for a car loan.
* The TDSR can also change over time. If you make more money or pay off some of your debt, your TDSR will decrease.

If you are concerned about your TDSR, there are a few things you can do to improve it. You can increase your income by getting a raise or a second job. You can also pay down your debt or consolidate your loans into one lower-interest loan.

By understanding the TDSR and taking steps to improve it, you can make it easier to qualify for a loan and get a lower interest rate.

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