debt ratio
Also called: debt ratio, DSR
The comparison of total installments to monthly income.
What it means
A debt ratio is the comparison between a family's total monthly debt installments and monthly net income. This figure shows what percentage of income is already 'used up' to pay debt. In Indonesia, banks often use this ratio when assessing a prospective borrower's eligibility, including for home loans.
Why it matters for families
The debt ratio helps a family know whether their ability to pay is still healthy or already too heavy. If the ratio is too high, the money left for basic needs and savings shrinks. As a result, the family is easily shaken when unexpected expenses arise, such as hospital bills or home repairs.
Example
For example, a family's net income is Rp10 million per month. Home installment Rp2.5 million, motorcycle installment Rp800 thousand, and other installments Rp700 thousand, totaling Rp4 million. That means the debt ratio is 40 percent. This figure is already high and new debt should preferably not be added.
Common misunderstanding
Many people think the debt ratio is calculated only from the home installment. In fact, all monthly installments, including credit cards and other loans, are counted.