Loan Affordability Calculator

Enter Calculation

Monthly Payment You Can Afford

Annual Interest Rate (%)

Loan Term (years)

Results

Maximum Loan Amount

166,791.61

you can borrow at this payment

Total of Payments	360,000
Total Interest	193,208.39

What Is a Loan Affordability Calculator?

A loan affordability calculator works backwards from the monthly payment you can comfortably afford to the maximum loan amount you can borrow. Instead of asking "what is the payment on this loan?", it answers "how big a loan fits my budget?" This is ideal for mortgages, car loans, and personal loans when you know your spare monthly cash but not the price you should target.

How to Use It

Enter three values: the monthly payment you can afford, the annual interest rate (APR) the lender quotes, and the loan term in years. The calculator converts the rate and term into monthly figures and returns the maximum principal that payment will support, plus the total you will pay and the total interest cost over the life of the loan.

The Formula Explained

The calculation is the present value of an annuity:

$$\text{MaxLoan} = \text{PMT} \times \frac{1 - (1 + r)^{-n}}{r}$$

Here PMT is the monthly payment, r is the monthly interest rate (annual rate \(\div 12 \div 100\)), and n is the total number of monthly payments (years \(\times 12\)). When the interest rate is zero, the formula simplifies to \(\text{MaxLoan} = \text{PMT} \times n\).

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The maximum loan is the present value of all your fixed monthly payments discounted at the interest rate.

Worked Example

Suppose you can afford $1,000 per month, the rate is 6% APR, and the term is 30 years. Then \(r = 0.06 \div 12 = 0.005\) and \(n = 360\). $$\text{MaxLoan} = 1000 \times \frac{1 - 1.005^{-360}}{0.005} \approx \$166{,}791.61$$ Over 30 years you would pay $360,000 in total, of which about $193,208 is interest.

Worked example: how the affordable loan amount compares to the total interest paid over the term.

FAQ

Does this include taxes and insurance? No. It calculates the loan principal supported by your payment toward principal and interest only. For a mortgage, reserve part of your budget for property taxes, insurance, and fees.

Why does a longer term let me borrow more? Stretching payments over more months spreads the principal out, so each fixed payment supports a larger loan — but you pay far more interest overall.

Is this currency-specific? No. Enter amounts in any currency; the math is universal as long as the payment, rate, and term are consistent.