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Loan Affordability Calculator

Find out the maximum loan and monthly payment your income can support.

How it is calculated

The tool first caps the payment: max payment = income × DTI / 100, where income is your gross monthly income and DTI is the share of it you are willing to give to debt payments. It then converts that payment into a principal using the annuity formula loan = P × (1 − (1 + r)−n) / r, where P is the max payment, r is the interest rate per period as a decimal (rate / 100) and n is the number of periods. The rate and the term must use the same period: a monthly rate pairs with a term in months. If the rate is 0 the loan is simply payment × term. Negative income, DTI or rate, or a term of zero or less, returns no result. Only the one new loan is modelled; existing debts are not added, so include them in your DTI choice.

Worked example

Monthly income is 5000 and the target DTI is 36%. The maximum payment is 5000 × 36 / 100 = $1,800.00. The interest rate is entered as 0.5 per month (r = 0.005) over 60 months. The discount factor is 1 − 1.005−60 ≈ 0.2586, and dividing by 0.005 gives about 51.73. Multiplying 1800 by that gives the maximum loan, $93,106.01. Borrowing more than that at this payment cap would need a longer term or a lower rate.

Try this example →

Common mistakes

  • Entering an annual rate with a term in months. A 6% annual rate must be given as 0.5 per month, or the term must be in years.
  • Using net (take-home) income when your lender's DTI limit is based on gross income, or the reverse.
  • Forgetting existing debts: if you already pay a car loan, your DTI room for the new loan is smaller than the total ratio.
  • Treating the result as an approval. It leaves out insurance, taxes, fees and the down payment, which change what you can actually spend.

Sources

About this calculator

This calculator estimates the maximum monthly payment and total loan amount you can realistically afford, based on your monthly income, a target debt-to-income (DTI) ratio, the loan's interest rate and its term — the same variables lenders check when qualifying a borrower.

Homebuyers and car buyers use it before shopping to know their realistic budget, and mortgage brokers use the same DTI logic when pre-qualifying clients.

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Comments (1)

  • Editorial team

    Be careful with the debt-to-income field: it is applied as the whole share of income you are willing to put into this one loan. If you already pay other debts, enter only what is left of your target ratio, otherwise the maximum is overstated. Like the loan calculator, the rate is per month and the term is in months. What ratio does your own lender work with? Tell us how it compares.

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