Category Archives: TDSR (Total Debt Service Ratio)

What is TDSR? (total debt service ratio)

In this post we will go over our 6th point in “Teaching kids about credit

What is TDSR? (total debt service ratio)

Total Debt Service Ratio(TDSR) is simply explained as the percentage of debt that you are carrying versus the money you are making. You can find many definitions on the Internet to explain this but, again, the simple way to explain this is the take your total Gross(before tax) income and write that figure down. Now take your total debt(including all monthly payments). Write this number down. Now divide the Debt by the Income. This would give you a Debt Service percentage.

Here’s an example:

Your monthly income:           $4000

Rent Payment                        $550

Utilities                                   $150

Car Loan                               $400

Credit cards ($1000  x 3%)     $30

Total monthly payments:          $1130

TDSR ($4000 / $1130):         28.25%

Keep in mind that all payments are to be considered when calculating this TDSR %. Lets keep in mind that banks will usually use 3% of the total limit of a credit card or Line of Credit. Rent payment and/or mortgage payment will also need to be calculated with property taxes, and school fees.

Most lenders will accept a TDSR under 40%. Of course every lender is different but generally speaking a TDSR under 40% is considered acceptable. Again, this will depend on the type of loan your would be applying for. A car loan Calgary company might like to see a TDSR under 55%, where applying for a mortgage might be 30%. It would be good to have this question answered before applying for a car loan Calgary. My personal opinion would be that under 20% TDSR is considered very good. I would recommend trying to keep a TDSR under 30%(as a good range).

Just my 2 Cents

-M

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