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What Is Debt-Service-Ratio (DSR) & How It Calculates Your Financial Health

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What Is Debt-Service-Ratio (DSR) & How It Calculates Your Financial Health

 

Your DSR score basically tells you if your income is enough to cover your commitments such as your credit card bills, car loans and personal loans. 

A method used by banks, it helps the bank to estimate how much you can afford to pay your monthly loan installments and debts. 

If you are planning to purchase a property or car, the banks will take into consideration all of your current loans and other debts, and whether you can afford the loan repayments.

What’s a good Debt-Service-Ratio? 

The lower your DSR score, the better your financial health is! A low DSR score indicates that you will be able to pay your monthly installments on time. 

Debt-Service-Ratio (DSR) Score Level

The general rule of thumb is to maintain your DSR within the 30-40% range. While some banks may approve loans for individuals with a DSR above 40%, approval is less certain and may come with higher interest rates or stricter terms. Refer to the meter score above to see each percentage range and its corresponding financial health level.

What to include when calculating Debt-Service-Ratio? 

Firstly, to calculate your DSR score, you should take into account your bank debts and non-bank loans. 

Bank Debts

Non-Bank Debts 

Car loans 

Educational loans 

Housing loans 

Leases

Personal loans 

Pawn 

Credit card bills 

Payment installments from non-bank institutions like AEON Credit, FlexiPlans and others. 

Debt-Service-Ratio Formula: How to Calculate

Once you have identified your debts and financial commitments, you can use the formula below to calculate your DSR. 

Total Monthly Commitments / Net Monthly Income x 100% = Debt Service Ratio

Note: Your net monthly income is after deducting your EPF, SOCSO, taxes and others.

Here’s an example: 

Net Monthly Income 

RM10,000

Total Monthly Commitment 

RM1,500 (personal loans) + RM600 (car loan) + RM1,000 (credit card) + RM150 (PTPTN) = 

RM3,250

Debt-Service-Ratio

RM3,250 / RM10,000 x 100 = 

32% 

 

Based on the calculations, it shows that the DSR Score is at a good level, which is at 32%! 

Check your financial health with the ANIKA Chatbot

While the formula above can help you calculate your DSR, it may not accurately reflect your actual DSR as shown in your CCRIS report.

ANIKA is the 1st AI-Powered Virtual Consultant Chabot in Malaysia that can help you improve your finances. Equipped with eKYC (aka electronic Know Your Customer), she’s able to provide you with an accurate score of your DSR – simply by scanning your MyKad and doing a Face ID verification. 

As we are integrated with our trusted official credit reporting agencies such as Experian and Credit Bureau Malaysia, the results will be based on your CCRIS Report, which is a list of all your financing and repayment history over the past 12 months. 

Knowing your DSR score might reveal some harsh realities, but understanding your financial standing is the first step towards improvement. 

We offer FREE consultations to help you. Click HERE to book an appointment on the ANIKA chatbot.

Tips to Improve Your DSR Score

  • Pay off your debts as much as you can. 
  • Don’t maximise your credit card spend.
  • Keep records of your steady income and non-bank repayments as proof that it’s consistent. 
  • Start saving more. You can use this as a supporting document to strengthen your loan application if your DSR is high. 

At IBPO, our purpose is clear – together, let’s enhance financial literacy among Malaysians. We are dedicated to empowering individuals with the knowledge and financial tools they need to make informed decisions, achieve their financial aspirations, and live better lives.