Loan Affordability Calculator
Start from what you can pay each month — see the loan it supports.
How this is calculated
P = M·((1+r)ⁿ − 1) ÷ (r(1+r)ⁿ) — the amortization formula solved for the principal
Worked example: $400/month at 8% over 5 years supports a loan of about $19,700, repaying roughly $24,000 in total. Keep the budget honest — leave room for the rest of your life, not just the loan.
Borrow to the budget, not the max
The largest loan a payment supports is rarely the wisest. Leave headroom for rate rises (on variable loans), emergencies, and the running costs of whatever you’re buying.
Start from the payment, not the purchase
Working backwards from what you can comfortably pay is the direction that protects you. The alternative — finding a price you like and asking what the payment would be — invites the term to stretch until the payment fits, which is exactly how people end up in seven-year car loans and are still paying for a vehicle they have stopped enjoying.
The number this calculator produces is a ceiling for the loan, not a target. Borrowing meaningfully below it is what leaves room for the rate to move, the income to wobble, and life to happen.
Why a lender's approval may be lower — or higher
This is the pure arithmetic of what a payment supports. Lenders add their own tests. Debt-to-income limits cap total monthly obligations as a share of gross income, commonly around 36–43% including the new loan. Credit scoring changes the rate you are offered, which changes the amount that payment supports. Affordability regulation in some countries requires the lender to examine actual expenses rather than a ratio — South Africa's National Credit Act does exactly this, which is why a granular affordability assessment can approve less than a ratio would suggest.
Approval can also come in higher than is wise. A lender assessing you at today's rate on a variable-rate product is not underwriting your comfort three rate hikes from now.
Stress-test before you commit
On a variable rate, run the affordability figure again two or three percentage points higher and ask whether the payment still works. Many regulators require lenders to do this; almost no borrowers do it for themselves. A loan that only works at the current rate is a bet that rates will not rise, and it is a bet with your home or car as the stake.
What the payment leaves out
The instalment is not the cost of ownership. A car adds insurance, licensing, fuel, tyres and maintenance, and comprehensive cover is usually compulsory while financed. A home adds rates, levies, insurance, and a maintenance reserve that is commonly estimated at 1% of the property value a year. Budgeting to the instalment alone is the most reliable way to be surprised in month four.
Frequently asked questions
Is this the same as what a lender will approve?
Not exactly — this is the pure maths of “what loan does this payment cover.” Lenders also weigh your income, other debts, credit score and their own affordability caps, so an approval can be lower. Use this to set a sensible target before you apply.
Why does a lower rate let me borrow so much more?
Because less of every payment goes to interest, more clears principal — so the same budget supports a bigger balance. Drop the rate and watch the borrow figure jump; it’s why shopping the rate matters as much as the amount.