What This Calculator Does
The Affordable Loan from Monthly Budget Calculator works backwards from a payment you are comfortable making each month to the largest loan principal that fits that budget. Instead of asking "what will my payment be?", it answers "how much can I borrow?" — making it ideal for shopping for a mortgage, auto loan, or personal loan within a set spending limit.
How to Use It
Enter the monthly payment you can afford, the annual interest rate offered by the lender, and the loan term in years. The calculator converts the annual rate to a monthly rate, computes the number of monthly payments, and returns the maximum principal along with the total amount paid and total interest over the life of the loan.
The Formula Explained
The present value of an annuity formula is used: $$L = M \cdot \frac{1 - (1+r)^{-n}}{r}$$ Here \(r\) is the monthly interest rate (annual rate ÷ 100 ÷ 12) and \(n\) is the total number of monthly payments (years × 12). When the interest rate is zero, the loan simply equals \(L = \text{Budget} \times n\).
Worked Example
Suppose you can pay $1,500 per month, the annual rate is 6%, and the term is 30 years. The monthly rate is \(0.06 \div 12 = 0.005\) and \(n = 360\). The loan = $$1500 \times \frac{1 - 1.005^{-360}}{0.005} \approx \$250{,}187.$$ Over 30 years you pay \(1500 \times 360 = \$540{,}000\), meaning about $289,813 is interest.
FAQ
Is property tax or insurance included? No. This computes only loan principal and interest. For a mortgage, budget extra for taxes, insurance, and fees.
What rate should I enter? Use the lender's annual percentage (nominal) rate. The tool divides it by 12 for monthly compounding.
Can I use it for any loan? Yes — mortgages, car loans, and personal loans all follow the same amortization math.
