TDSR – Total Debt Service Ratio

When applying for credit lenders will use TDSR(Total Debt Service Ratio) to be able to decide whether you can handle a loan or not. This is important when it comes to applying for a car loan in Canada.

How TDSR is calculated:

  • Calculate your total confirmed gross(before tax) earnings
  • Add up all your monthly expenses(rent, credit payments, and all other expense payments)
  • Take the your monthly expenses and divide by your Gross wage
  • This will give you your TDSR

Example:  Your total monthly gross earnings are $2500, Your rent, credit payments, and all other monthly payments are $1000. This would give you a TDSR of 40%.

When applying for a Truck loan in Canada most lenders will like to see a TDSR under 50% prior to approving a new payment. Lenders will not approve a client for a car loan if it puts the client into financial difficulty. Obviously the lender does not want to approve a loan if their will be chance of that client going bankrupt. Remember that total Gross earnings is not the amount you think you make, it is the amount that can be verified by the lender. This is usually verified by your last 2 pay stubs, and in some cases an employment letter.

TDSR is only 1 method used by lenders in order to approved a car loan in Canada. In upcoming posts we will talk about other methods used by lenders.

Just my 2 Cents

-M

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