Debt to income Ratio?

[msthunder]

Can someone explain how prosper calculates the debt to income ratio?  I have a friend who has listed, has less money after monthly expenses than i do and has a lower DTI.  And she is 50% funded.

Is it calculated by how much money is left after paying monthly expenses?  I feel like a big reason I am not getting funded is the 49% DTI on my listing,, but I have the money at the end of the month to pay the debt!!  I am confused and frustrated.

Thanks!!
Stormy

[go4reward]

I think DTI is computed based on total income vs. total debts.

[eco-casaubon]

It is the ratio of monthly non-housing debt to monthly income.  It will not necessarily factor/reflect someone's monthly living expenses, though.

Prosper's definition of DTI:
Debt to Income Ratio

Debt-to-income ratio (or DTI) is a measurement of the borrower's ability to take on additional debt. This number measures the borrower's monthly debt payments (excluding housing payments) relative to their monthly income. The DTI is expressed as a percentage, and is calculated by dividing the borrower's monthly non-housing debt by their monthly income. The borrower's monthly non-housing debt is derived from the borrower's credit report, and also includes the monthly payment on the Prosper loan the borrower is requesting. The borrower's monthly income is derived from the borrower's stated income. Generally, a DTI of 20% is considered the upper end of normal when excluding housing debt.

If the DTI is shown as "Not calculated", it may be for one of three reasons. First, DTI is not calculated for borrowers who indicate to Prosper that they cannot provide documented proof of income. Second, DTI is not calculated for self-employed borrowers. Third, DTI is not calculated in those rare instances where the borrower's credit report does not provide the borrower's monthly debt burden.

Self-employed borrowers have their DTI displayed as "not calculated" because of the difficulty in verifying their income. This is due primarily to the wide variety of business activities engaged in by self-employed borrowers, which present equally wide variations in the types of income documentation and tax statements often used to verify income. This makes income verification for many self-employed borrowers extremely difficult if not impossible. As a result, the DTI of self-employed borrowers is listed as "not calculated".

[Jason]

Want a deeper understanding of the credit information Prosper uses and what it means? Try logging into Prosper then go to Help>Video. The 2007 panel videos really gives you a strong foundation on how to analyze the credit information.

You can fast forward thru them, but they are worth your hour or so to watch.

[taxesformuchlessinc]

Let me see if I understand this.

[taxesformuchlessinc]

For example:  Total income = $2,000  Total of all loan payments = $1,000

$1,000 / $2,000 = 50% Debt to income ratio?

Total income = $2,000 Total of all loan payments = $250

$250 / $2,000 = 12.5% Debt to income ratio?

Is that the basic logic?

taxesformuchlessinc

[Investar]

For example:  Total income = $2,000  Total of all loan payments = $1,000
$1,000 / $2,000 = 50% Debt to income ratio?

Is that the basic logic?

Yes. That's it.

[BAEVentures]

Just thought I would notate for your reference, the Prosper DTI calculator does not include mortgage payments, but it does include what the payment will be of your current listing request. So if you put up a loan request for $15,000 it will show you with a higher DTI than your loan request for $3,000. It is based on your gross income and uses the figure you supply to Prosper as your "annual income" when creating your loan.

BAEVentures