What This Calculator Does
The Maximum Loan from Disposable Income Calculator tells you the largest loan principal you can responsibly borrow based on what you can afford to pay each month. Instead of starting from a loan amount, it starts from your budget: you decide how much of your monthly disposable income you are comfortable committing to repayments, and the calculator works backward to the maximum loan that fits that payment.
How to Use It
Enter your monthly disposable income (what is left after essential expenses), choose the percentage of that income you want to dedicate to loan repayments, then enter the annual interest rate and the loan term in years. The result shows your maximum borrowable principal along with the monthly payment, total amount paid, and total interest.
The Formula Explained
This is the present-value-of-an-annuity formula. The affordable payment P equals income times share. The monthly rate r is the annual rate divided by 12, and n is the term in months. The maximum loan equals
$$L = P \cdot \frac{1 - (1 + r)^{-n}}{r}$$When the interest rate is zero, the maximum loan is simply \(P \times n\).
Worked Example
Suppose your monthly disposable income is 2,000 and you allocate 30% to repayments, giving an affordable payment of 600. With a 6% annual rate (0.5% monthly, \(r = 0.005\)) over 10 years (\(n = 120\) months), the factor
$$\frac{1 - 1.005^{-120}}{0.005} \approx 90.0735$$so the maximum loan
$$L \approx 600 \times 90.0735 \approx 54{,}044$$Over the term you would pay 72,000, of which about 17,956 is interest.
FAQ
What share of income is sensible? Many lenders prefer total debt repayments under about 30–40% of income, but the right figure depends on your other commitments.
Is disposable income before or after tax? Use take-home income remaining after taxes and essential living costs for the most realistic result.
Does this include fees or insurance? No — it models loan principal and interest only. Add any fees separately when comparing offers.
