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Debt Service Ratio (DSR) is a measure used by financial institutions such as banks to assess the financial obligations of potential borrowers.  This ratio shows the proportion of an individual’s gross income that is taken up by expenses such as housing, utilities, loan payments etc. Most financial institutions use a range of 40- 45% as the maximum percentage of debt to income that a person should maintain. This means that 40-45% of the individual’s income is going towards repayment of debt. 

What does this mean for you?

If you have a low DSR or one which is within the range then you are well on your way to qualifying for a loan. On the other hand however, if your DSR is above the approved level then you may not qualify. The lending officer may suggest taking the loan for a lesser amount.  If your DSR is too high, you become over-stretched financially and this may impact you negatively if you were to fall ill or lose your job. It is therefore imperative that you keep your DSRas low as possible. One way of doing this is to amalgamate present debts to reduce repayments.  You should discuss the best way of restructuring your debt with your financial institution. For more information on DSR and how you can reduce your Debt Service Ratio call a lending officer at Bank of Saint Lucia at 456-6000.