Loan Affordability Calculator: Can You Afford That Loan?

Before you apply for a personal loan, car loan, or mortgage, check whether the payment actually fits. This calculator applies the same debt-to-income (DTI) test lenders use, measured on gross monthly income, and turns it into a maximum monthly payment and a maximum loan amount, then tells you whether the loan you want fits inside it.

The short answer: a lender sees a loan as affordable when all your monthly debt payments, including the new one, stay under a set share of your gross monthly income, usually 36% to 45%. In the calculator's default example, 36% of $5,000 is $1,800; minus $600 of existing debt payments, that leaves room for a $1,200 payment, enough for about $61,330 over five years at 6.5%. The requested $25,000 loan costs $489.15 a month, so it fits with a total DTI of 21.8%.

This calculator is for informational purposes only. Results are estimates, and a lender's decision also depends on your credit, employment, and its own rules.

What each input means

How the calculator works

1. Back-end room = gross monthly income × Max DTI − existing debt payments (− taxes and insurance, for a mortgage). That's the largest new payment the total-debt limit allows.
2. Front-end room (mortgages only) = gross monthly income × housing ratio − taxes, insurance, and HOA. The smaller of the two is your maximum principal-and-interest payment, and the results say which ratio is binding.
3. Maximum loan = the loan amount whose payment equals that maximum, found with the present-value formula: Payment × [1 − (1 + r)^−n] ÷ r, where r is the monthly rate and n is the number of months.
4. Payment on your desired loan = P × r(1 + r)^n ÷ [(1 + r)^n − 1].
5. Verdict: within your limit if the desired payment is at or below the maximum payment. The summary also shows your DTI before and after the loan.
6. If it doesn't fit, the tool shows the gross income that would make the ratios work and how much to trim from the loan amount.

The ratio uses gross income the way the CFPB defines debt-to-income: total monthly debt payments divided by gross monthly income. Living expenses such as food and utilities aren't part of it, which is why the stress tests below matter.

Worked example 1: the default inputs

• Gross monthly income: $5,000
• Existing debt payments: $600 (current DTI 12%)
• Max DTI: 36% → total debt allowed: $5,000 × 0.36 = $1,800
• Room for the new payment: $1,800 − $600 = $1,200
• At 6.5% for 60 months, $1,200 a month supports a loan of about $61,330
• Desired loan: $25,000 → payment $489.15 a month
• DTI with the loan: ($600 + $489.15) ÷ $5,000 = 21.8%, about $711 a month under the limit

Worked example 2: a lender's 36% test on a larger loan

Suppose you earn $6,000 a month before tax, already pay $650 a month on a car and student loan, and the lender's limit is 36%.

• Total debt allowed: $6,000 × 36% = $2,160
• Minus current debt payments: $2,160 − $650 = $1,510 available for the new loan
• At 8% for 60 months, $1,510 a month supports about $74,470

Enter $6,000 as gross income and $650 as existing debt payments to reproduce it. Approval at $1,510 doesn't mean the payment is comfortable: taxes, rent, and groceries aren't in that ratio.

Worked example 3: a mortgage with both ratios

A household earns $10,000 a month gross, pays $500 a month on other debts, and expects $600 a month of property tax and insurance. Limits: 28% front-end, 36% back-end, 6.5% for 30 years.

• Front-end room: $10,000 × 28% − $600 = $2,200
• Back-end room: $10,000 × 36% − $500 − $600 = $2,500
• The housing ratio binds, so the maximum principal-and-interest payment is $2,200, which supports about $348,060 of loan
• A $350,000 loan costs $2,212.24 a month, just over the limit; the tool shows it needs about $44 more gross monthly income or a loan about $1,940 smaller

What debt-to-income ratio do lenders accept?

There is no single legal limit. A few published benchmarks:

Below about 36%, most borrowers have room to absorb a surprise expense. Above about 43%, lenders get more selective and the cash-flow risk rises. For rental property, lenders add a share of expected rent to income; the real estate DTI calculator handles that version.

How the loan term changes affordability

A longer term lowers the payment and raises the total cost. For a $30,000 loan at 7.5%:

Stretching from 36 to 84 months cuts the payment by about half but more than doubles the interest. On a car, a long term also raises the chance you'll owe more than the vehicle is worth. To see the payment-by-payment breakdown and the effect of extra payments, run the same loan through the amortized loan calculator.

How much can you borrow per $100 of payment?

A quick conversion helps when you're shopping. Each $100 of monthly payment supports roughly:

• $3,190 over 36 months at 8%
• $5,110 over 60 months at 6.5%
• $15,820 over 360 months at 6.5% (a 30-year mortgage)

So if your budget has room for a $1,800 mortgage payment for principal and interest only, at 6.5% for 30 years that's about $284,800 of loan. Property taxes, insurance, and any HOA dues come out of the same budget, so subtract them before converting. For rental purchases, the investment property mortgage calculator includes those costs.

Three stress tests before you sign

A loan that fits today's budget can still break it next year. Run these checks with the calculator:

1. Take-home test. DTI ignores taxes and living costs, so check the payment against your own budget too: take-home pay minus rent, utilities, groceries, insurance, existing debt payments, and the savings you don't want to stop. If the new payment doesn't fit in what's left, the loan is too big for you even if a lender would approve it.
2. Rate test. If you haven't locked a rate, add two percentage points. In the default example, $25,000 at 8.5% instead of 6.5% raises the payment from $489.15 to about $512.91, still well under the $1,200 limit.
3. Income-drop test. Cut your income by 10% to see whether the loan still fits after a lost bonus or fewer hours. With $4,500 instead of $5,000, 36% allows $1,620 of total debt, leaving $1,020 after the $600 of existing payments, which still covers $489.15.

If a loan passes all three, it's a sturdy fit. If it fails two, borrow less or wait.

What counts as a monthly debt payment

Lenders count recurring obligations that show up on your credit report or in court orders:

• Minimum payments on credit cards, even if you pay in full each month
• Car loans and leases
• Student loans; if a loan is deferred or in an income-driven plan, lenders use the actual payment or a set percentage of the balance, depending on the program
• Personal loans and buy-now-pay-later plans that report to credit bureaus
• Child support and alimony
• For a mortgage application, any other housing payments you'll keep, such as a second home

They don't count rent you'll stop paying when you buy, utilities, phone bills, groceries, or insurance premiums. Those still matter for your own budget, which is what the take-home test above is for.

When the calculator says you can't afford it

The results show three levers. Here's how to think about each:

1. Borrow less. Make a bigger down payment or buy a cheaper car. The tool shows the exact amount to trim.
2. Lower the rate. A better credit score or a cosigner can save thousands. Paying down a credit card balance before applying lowers both your DTI and your utilization.
3. Raise income or pay off a debt. Clearing a $150 monthly payment, such as a nearly paid-off car loan, adds $150 of room under the DTI limit and about $7,700 of borrowing power at 6.5% over five years.

Stretching the term is a fourth lever, but it's the most expensive one, as the term table shows.

Hidden costs that change the real payment

• Origination fees of a few percent can come out of the loan proceeds, so you receive less than you borrow.
• Insurance and taxes on a car or home add to the monthly cost but aren't in the loan payment.
• Variable rates on HELOCs and some private loans can raise the payment later.
• Prepayment penalties are uncommon on personal loans but worth checking.

If the loan is for a new, U.S.-assembled vehicle, part of the interest may be deductible from 2025 through 2028. See the car loan interest deduction calculator. And if you're borrowing to pay down other debts, compare the true cost of what you owe today with the debt cost calculator first.