Definition
In Korea, DSR is a ratio that shows how much of your yearly income goes to repaying debt. Its Korean name is the total debt service ratio, and DSR is the English abbreviation. Korean banks look at this number to decide whether to lend you more.
Water draining out of the bucket called your salary
Think of your income as a big bucket. The water that fills it over a year is the money you earn. Some of that water drains out every month to pay off debt.
If more than half the bucket drains away, life gets tight. A sudden big expense or a shaky job can put you in danger right away. That's why a lender measures this share before handing out new money.
The math is one division. Add up the principal and interest you owe in a year, then divide by that year's income. If someone earns 50 million won a year and pays back 20 million won, the ratio is 40%.
A bigger number means debt takes up a bigger share of your income. That leaves less room to borrow more.
Principal included, and all your debts counted together
This calculation has two special features. One is that it counts the principal, not just the interest. The other is that it gathers up not only home-secured loans but also personal loans and credit card cash advances.
The older rule only counted principal and interest on home-secured loans, plus just the interest on other loans. So even if you had several personal loans due in a short time, they barely showed up in the number.
The current rule adds up everything you have to repay. That's why splitting your borrowing across several banks can't raise your limit.
The repayment period also shifts the number a lot. For the same amount, a longer repayment period means less principal due each year, so the ratio drops. But keep in mind that a longer period also means more years of paying interest.
To be more precise: it looks at income, not collateral
To be more precise, this ratio measures your ability to repay. It doesn't measure the price of a home or the value of collateral. There are separate rules for looking at collateral.
That's why documents proving your income matter. If your real earnings can't be shown on paper, your income may be counted low, and your limit shrinks with it. This is why putting up an expensive home as collateral doesn't give you a roomy limit if your income is small.
The scope differs from loan to loan. Small loans and some loans needed for policy reasons may be left out of the calculation, and some items, like installment purchases of goods on a credit card, aren't included at all. The ratio cap and the exceptions change over time, so it's most accurate to ask your own bank about your actual limit.
The purpose of this yardstick is clear. By letting people borrow only what they can repay, it aims to reduce the risk of households and financial companies wobbling together.
Common misconceptions
DSR only looks at the interest burden.
It adds interest and principal together. So a loan that must be repaid in a short time pushes the ratio up sharply.
Splitting your loans across several banks can raise your limit.
Loans from all lenders are added together, so splitting them up doesn't change the ratio.
Where you meet it
Even if you borrow the same amount, a longer repayment period means less principal due each year, so the ratio goes down.
If you still have personal loans and credit card cash advances, the amount you can borrow with a home-secured loan shrinks by that much.
In one sentence
DSR is the ratio of your yearly income that goes to paying principal and interest, and this number shapes how much you can borrow.