Debt to Service Ratio

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With Australia’s household debt tripling over the past 25 years it’s no wonder there are people like us at Debt Freak.com.au trying our best to help others manage it and take control of their finances.

DIR Ratio

Debt to Income Ratio (DTIR) is the percentage of money leaving our bank accounts to spend or pay bills compared to the amount left over and saved.


Incidentally, when you go to a bank for any type of loan they have a special calculation that they call a Debt to Service Ratio. This determines if they will lend money to you or not.

The DSR set by most banks is around the 35%1 bracket as there is a belief that this is a healthy range for most households particularly when it comes to paying off a home loan.


The DTIR is generally a good way of keeping a balance between the needs and wants in a household and allows the boundaries between bad debt and good savings.

Low interest rates are commonly the cause for the sudden rise in the DTIR as the institutes offer us cheap money; we tend to accept it more willingly. This is also due to the ‘buy now pay later’ phenomenon that satisfies our propensity for instant gratification.

Unfortunately the statistics show us that Australia has become the most indebt country in the world2 due to the commercial programming insisting we buy bigger houses and properties giving us massive mortgages. But as markets demonstrate over decades, there will come a time when the bubble must burst and housing prices fall and interest rates rise. There is no time like the present to review your family’s finances.

I have provided a FREE copy of my DTIR spreadsheet for you to use. Just enter all your details into the fields and at the bottom of the sheet you will see the results. The ADVICE line will automatically change depending on your DTIR. Enjoy!

1.www.yourinvestmentpropertymag.com.au

2.https://www.theguardian.com/business/2016/jan/15/how-australian-households-became-the-most-indebted-in-the-world