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Author: Mohamed Hamza Ghaouri

Debt Service Ratio (DSR) is a ratio used to assess the level of indebtedness of individuals and institutions. The DSR is basically a ratio of your debt (such as credit card bills, car loans, personal loans, etc.) to your net income. When you apply for a loan, the banks will review this ratio before deciding to grant the loan.

In general, calculating your DSR is:

DSR = Total Debt/ Net Income x 100

  • Example: 
    • Total Debt
      • House loan: USD1000.
      • Car loan: USD800.
      • Credit card bills: USD400.

So, your total monthly debt = 1000 + 800 + 400 = USD2,200

  • Net Income
    • Salary: USD5,000 a month.
    • Investment proceedings: USD 500 a month
  • Others
    • Tax USD150.

So, your net income = 5,000 + 500 – 150= RM5,350

DSR = USD2000/USD5,350 x 100 = 37.4%

Banks usually won’t give you a loan if your DSR is above 60%. If your DSR is above 60%, consider debt repayment strategies. Avoid accumulating too much debt. Budget your monthly expenses so you know where your money is going and where you can afford to spend.

Another way to reduce your DSR is to have secondary income. This will create a balance between your income and debt payments. Invest in profit generating opportunities and avoid hoarding your money in saving accounts. Saving accounts waste for you the opportunity to grow your money. As Robert G. Allen have said: “How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.”

In today’s world, having a secondary source of income is very important to meet your needs and withstand life downturns. Accordingly, Finterra Global Plantation (FGP) is a leading example in secondary income offerings as it provides you with an attractive investment opportunity that constitutes an excellent passive income. Through FGP you can balance your income/debt ratio through the quarterly pay-outs. The project offers an exceptional opportunity for investors aiming to achieve significant secondary income and generate profits without bearing high risk. The duration of this opportunity is only 40 months which makes it appealing. The income proceedings from this investment will help lower down your DSR. You can renew your engagement with FGP for an additional 40 months after the end of the first tenure.

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