debt to income

Debt-to-Income Ratio (DTI): What It Is and Why It Matters

OK Climb Credit blog readers, it’s time to talk ratios — to be more specific, the debt-to-income ratio (DTI). Now before you close out this window to avoid having to deal with math, let us just say that we’ll make this very painless. Trust us. So what is the debt-to-income ratio? Your DTI is your monthly debt payments divided by your monthly income. And we’re here to break down the role this plays in your loan applications, including that Climb Credit loan application.

Why is my debt-to-income ratio important?

Many lenders, when determining whether an application qualifies, look at DTI as one of their criteria — your DTI can even affect the interest rate a lender will offer you. Having less existing debt to pay off is a good indicator that you’ll be more able to pay off the new debt you’re about to take on. After all, the lower your monthly payments are, the easier it is to make them!

Of course, not every lender looks at DTI, and each lender will weigh the importance of existing debt differently. Talk to each loan provider to see whether they take DTI into account and find out whether lowering that ratio will increase your chances of approval. For example: At Climb, we do look at DTI as one of many factors, so a lower DTI ratio can potentially lead to better loan terms.

Can I figure out my own debt-to-income ratio?

With just a simple calculation, you can check out your DTI yourself. First, add up all of your monthly payments. If you have $500/month in credit card payments, $300/month in student loans, and $350/month for an auto loan, your monthly debt is $1,150. Then, divide that by your gross monthly income. If you make $4,600/month before taxes, your debt-to-income ratio is 25%. (1,150/4,600 = 0.25)

So, if you’re going back to school and taking out another loan for your course, you could add another $184 in monthly payments and stay below a 30% DTI!

Debt-to-Income Ratio

What is a good debt-to-income ratio, and how can I improve mine?

If you have a high DTI (many student lenders have a threshold between 20–30%), the good news is that you can better it. Broadly, there are three ways you can improve this for your application:

  • Lower your debt: by paying off some of your debt faster, you’ll improve your DTI. Research the pros and cons to see if refinancing is a good option for you. Or, if your lenders allow prepayment, rework your budget to free up more money to make early debt payments (here are some popular budgeting tools, so you can do just that).

  • Increase your income: or you can try lowering your DTI from the other half of the ratio. Consider your current commitments to see if you have time to take on additional work (e.g. a part-time job), or negotiate your salary at work. And some debt — like student loans — while increasing DTI in the short term, ends up benefiting you in the long run. After all, many of our borrowers were able to switch jobs and increase their salaries after going through programs at our partner schools.

  • Add a co-borrower: Climb Credit applications give you the option to add another person to your loan. If you have a high DTI, someone in your life with a low DTI may be a good co-borrower. With Climb loans, as long as the co-borrower qualifies, so does the main applicant.

DTI is only one aspect loan companies may look at, along with other factors such as credit score and credit history. If you’re about to apply, we encourage you to read through FAQs and contact loan company representatives to see what you might do to make your application as strong as possible.

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What to Expect: Realistic Outcomes

Climb’s Comprehensive Access Solution can offer a strategic balance of increased enrollments and upfront cashflows compared to traditional lenders. While no financing solution guarantees 100% collection, our data-driven approach maximizes both upfront cash and long-term repayment rates.

Typical Partner Results:

  • 15-30% of students qualify for Climb Loans with upfront tuition delivered to the school shortly after course start
  • 45-60% of students qualify for 0% APR* payment plans
  • Enrollment increases of 20%+ reported by partner schools**

**Results vary by school and student demographics. This represents performance reported by individual school partners and should not be considered a guarantee of your specific outcomes.

The bottom line: CAS is designed to maximize your net tuition recovery while eliminating the administrative headaches of student financing.

Maximizing Your Results

Pro Tip: Schools that require student deposits and set up automatic payments during enrollment see significantly better repayment performance across all financing options. These simple steps can meaningfully improve your outcomes.

FAQs

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

Students are placed into funding brackets (Elite, Standard, Enhanced) based on our AI assessment. Higher-credit students generate higher upfront payments to your school, while students with limited credit are seamlessly directed to our 0% Payment Plan.

These brackets are established using data from over $1 billion in career training loan originations and may be adjusted periodically based on updated repayment trends.

Important note: Regardless of which bracket a student falls into, they are considered fully paid by your school once funded. The student’s repayment obligation exists exclusively between Climb and the student.

Elite Access not available for Computer Science programs. Upfront percentages vary by industry and loan terms.

Once Climb disburses upfront funding for a student loan, that student is considered fully paid by your school. You will not receive any additional payments for that student—the single upfront payment is complete and final.

From that point forward, the student’s repayment obligation exists exclusively between Climb and the student. Your school has zero liability if the student defaults, and you keep the full upfront payment regardless of the student’s future payment performance.

They’re automatically offered our 0% Interest Payment Plan, ensuring no student is turned away while maintaining steady monthly cash flow for your school.

Higher-credit students generate larger upfront payments (75-100% of tuition), while students with limited credit use our 0% APR* Payment Plan for consistent monthly revenue. Both options are risk-free for your school

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Typically, within 5-10 business days after your partnership agreement is signed.

Comprehensive onboarding webinar, continuous partner support via AI-assisted chat and live email—and real-time borrower assistance with our live-chat-available student success team.

No. Climb fully manages the administrative responsibilities—your team simply monitors your school’s performance via our intuitive School Portal.

Your school is fully protected either way. For Climb Loans, you keep the entire upfront payment with zero liability. For Payment Plans, you only receive what students actually pay, with no risk to your school.