Loan Affordability Calculator

Use this loan affordability calculator to turn a comfortable monthly payment into your maximum loan amount. Enter the rate and term to see what you can borrow.

What it does

The Loan Affordability Calculator works backwards from a monthly payment you are comfortable with to the largest loan that payment can support. Enter what you can pay each month, the interest rate, and the term, and it shows your maximum borrowing amount.

Data sources & parameters

This calculator uses standard financial formulas and runs entirely in your browser. It needs no external rate data — your result is computed only from the values you enter above.

We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.

The formula

max_loan = PMT × (1 − (1 + i)^−n) ÷ i, where i is the monthly rate and n the number of months

How it works

The tool treats your monthly payment as an annuity and discounts it to a present value at the monthly interest rate. That present value is the biggest loan whose repayments match the amount you can afford, and it also totals what you repay and how much of that is interest.

Where it is used

Setting a realistic budget before shopping for a mortgage or car loan
Checking how a rate change moves the amount you can borrow
Comparing a shorter term against a longer one for the same payment

Worked example

Someone who can pay $1,500.00 a month at 6% over 25 years can borrow up to …. They repay … in total, of which … is interest.

What the loan affordability calculator does

The loan affordability calculator shows how large a loan you can take on for a monthly payment you can comfortably manage. It starts from the payment and works back to the loan, because your monthly budget is usually the real constraint, not the price of what you want to buy.

Enter the payment you can afford each month, the annual interest rate on offer, and the term in years. The tool shows the maximum loan that payment can support, the total you would repay over the full term, and how much of that total is interest.

How affordability is calculated

The calculator uses the present value of an annuity. Your fixed monthly payment is treated as a stream of equal repayments, discounted back to a single lump sum at the monthly interest rate. That lump sum is the largest loan whose repayments exactly equal the payment you entered.

The monthly rate is the annual rate divided by twelve, and the number of periods is the term in years multiplied by twelve. At a zero interest rate, the maximum loan is the payment multiplied by the number of months. Once a rate applies, part of every payment goes to interest, and the loan the same payment can support falls.

Why start from the payment

Lenders and advertisements usually lead with a loan amount and then quote a payment, which can tempt you to borrow up to a number instead of up to your budget. Deciding first on a payment you can sustain in good months and bad sets a ceiling based on your real income and expenses, and only then shows how much house, car, or equipment it corresponds to. This guards against overborrowing.

The three inputs

The payment you can afford drives the result. A larger sustainable payment supports a proportionally larger loan, but stretching it leaves less slack for the unexpected.
A higher interest rate diverts more of each payment to interest, shrinking the loan the same payment can carry. Even a one-point difference can move the maximum loan noticeably over a long term.
Extending the term lets a given payment support a bigger loan, but every extra year adds interest. Shortening it gives a smaller loan and far less interest.

The total interest figure

Over a long term, interest can make up a large share of everything you pay, sometimes rivalling the amount borrowed. A slightly smaller loan, a shorter term, or a better rate can each cut the interest bill substantially, so many people use the tool to balance the amount they need against the total cost they are willing to accept.

Using the result responsibly

Treat the maximum loan as a ceiling, not a target. The figure covers principal and interest only, and real borrowing usually carries insurance, taxes, maintenance, or fees outside the loan. Leave headroom for these, and for the possibility that rates or circumstances change.

Stress-test the result. Try a higher rate to see how much your borrowing capacity would shrink if rates rose before you locked one in, and a shorter term to see how much interest you could save. Use the calculator to set a realistic budget before you shop and to compare offers on equal terms.

This article is general information only and is not financial advice.

About This Loan Affordability Calculator

Use this loan affordability calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.

Frequently asked questions

How does the loan affordability calculator work?

You enter the monthly payment you can comfortably afford, an annual interest rate, and the loan term. The calculator treats that payment as the repayment on a loan and works backwards to the largest amount whose monthly payments would match it, then shows the total you would repay and how much of that is interest.

Is the maximum loan the amount I should borrow?

Not necessarily. It is the largest loan a given payment can support, not a recommendation. A prudent budget usually leaves room for rate rises, emergencies, and other goals, so many borrowers deliberately choose a payment below the maximum they could technically manage.

Why does a higher interest rate reduce how much I can borrow?

A higher rate means more of each payment goes to interest and less to principal. Because your payment is fixed, a larger interest share leaves less capacity to repay the balance, so the loan the same payment can support shrinks as the rate rises.

How does the loan term change the result?

A longer term spreads the same payment over more months, which supports a larger loan but increases the total interest you pay. A shorter term limits the loan size but costs far less in interest overall. The calculator lets you weigh both effects side by side.

Does this include taxes, insurance, or fees?

No. The result covers principal and interest only. Real borrowing often adds costs such as insurance, property tax, or arrangement fees, so treat the figure as the loan portion of your budget, not the full monthly cost of ownership.

Is my data kept private?

Yes. The calculation runs entirely in your browser. Nothing you enter is uploaded, stored, or shared with anyone.

About the author

Written and reviewed by

Taha Kheirandish

Economics student and independent researcher

Taha Kheirandish reads tax codes the way other people read maps — to find out where a system actually leads, not where it claims to go.

He is an economics student, and his work here is comparative by design. A pension deferral bonus in Quebec, a commuting allowance in Germany, a rent-increase ceiling in the Netherlands: each is a decision a government made about how money should move, and each reads differently once you set it beside eight others. He builds and checks these calculators across nine markets from primary sources — the regulation rather than a summary of it, the ministry’s own circular rather than a news item quoting it.

That is the editorial standard of the site as well as his habit. Every rate, threshold and bracket here carries the document it was read from and the date it takes effect, and gets re-checked when the law moves rather than when someone happens to notice.

He is a researcher, not a licensed adviser, and nothing on this site is personal financial advice. It is arithmetic done carefully with its sources shown — so that you can check it, and take it to someone who is.

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