Here's a number that's ruining lives: 36%.
That's the standard debt-to-income ratio most banks use to approve or deny loans. If your monthly debt payments (including the new loan) exceed 36% of your gross monthly income, you're often rejected. But here's the thing — this rule was designed for people with steady W-2 incomes. Not for gig workers. Not for freelancers. Not for small business owners.
And it's garbage for them.
I had a client — let's call him Marcus — who drives for Uber and Lyft. He also does some Amazon Flex. His monthly income varies between $4,500 and $7,000 depending on the season. When he applied for a personal loan to consolidate about $12,000 in credit card debt, the bank used his lowest month to calculate his DTI. That was around $4,200. His debt payments were around $1,600. DTI = 38%. Denied.
Marcus was furious. He'd never missed a payment. His credit score was 715. He literally made more than enough in most months.
Look, I understand why banks use the lowest month. They want to be conservative. But it's not accurate for anyone with variable income. A better approach: average your last 12 months of income. Or take the last 6 months. Some lenders actually do this if you ask.
Marcus didn't know he could ask. He walked away from that bank and found an online lender that specializes in gig economy workers. They used his two-year tax returns and averaged his income. DTI came out to around 28%. He got approved at 9.5% APR — not great, but better than his credit cards at 22%.
If you're a gig worker or freelancer, here's my advice:
- Keep detailed records of your income. Use a spreadsheet or accounting software.
- File your taxes on time. Lenders will ask for tax returns, not just bank statements.
- Separate your business expenses from personal spending. A clean P&L statement helps.
- Ask lenders how they calculate income for variable earners. If they say "lowest month," move on.
The DTI rule isn't going away. But you can work around it by choosing lenders who understand your income pattern. Credit unions are often better than big banks for this. So are some online lenders.
Marcus is now debt-free except his mortgage. He sent me a screenshot of his credit score — 748. He's thinking about a small business loan to buy a second car for his fleet. I told him to come back when he's ready.
I will keep posting updates on this. Check back soon.
P.S. I forgot to mention — Marcus also asked his credit card companies to lower his APRs before he consolidated. They lowered two of them from 24% to around 18%. That helped his DTI because his minimum payments dropped. Small wins add up.