Loan affordability calculator
Work backward from a payment limit.
- Formula and assumptions shown
- Table and CSV export
- Runs in your browser
How it works
This calculator reverses the fixed-rate payment equation. Enter the payment you can test, then see the principal that fits under the entered rate and term.
For periodic rate r > 0: principal = payment × (1 − (1 + r)^(-n)) ÷ r; if r = 0: principal = payment × n. Upfront cash needed = principal + entered upfront fees.
The result is not a recommendation of what you can safely afford. Keep room for living costs, reserves, changing income, and charges outside principal and interest.
Assumptions
- The payment limit applies to principal and interest, with fixed periodic payments.
- The entered rate is fixed and divided into the monthly payment periods.
- The term is fully amortizing; upfront fees are reported separately as origination cash and are not included in the principal calculation.
- Income, credit, collateral, taxes, insurance, and approval criteria are excluded.
Worked example
$500 monthly for five years with a $300 upfront fee
At 6% with monthly payments, the payment supports about $25,862.78 of principal. The separate $300 upfront fee is paid in cash at origination rather than financed, so principal plus fees totals $26,162.78; the fee does not increase the financed principal.
Step by step
- Convert the rate and term. The monthly rate is 6% ÷ 12 = 0.5%, and 5 years gives 60 monthly payments.
- Compute the discount factor. (1.005)^−60 = 0.74137, so 1 − 0.74137 = 0.25863. This measures how much of the payment stream survives discounting at the loan rate.
- Solve for the principal. Principal = $500 × 0.25863 ÷ 0.005 = $25,862.78, the most a $500 payment can repay over 60 months at 6%.
- Add the upfront fee. $25,862.78 + $300 = $26,162.78. The fee is paid separately and does not change the principal.
- Estimate the interest. 60 × $500 = $30,000 of scheduled payments; $30,000 − $25,862.78 = $4,137.22 of interest.
How to read your result
The headline is the loan principal that the entered payment fully repays at the entered rate and term. The secondary figures show the payment limit, the upfront fees, principal plus fees, the total of all scheduled payments, and the interest included in them. The table repeats the same measures.
Principal plus upfront fees is the principal and the fee added together; only the fee comes from your own cash at closing, and the principal is the loan itself. If a lender finances the fee instead, the payment has to cover it, and the principal available for the purchase is smaller by roughly the fee.
The payment limit covers principal and interest only. For a car, sales tax, registration, and insurance sit outside it; for a home, property tax, insurance, and HOA dues do, which is why the mortgage affordability calculator handles them separately. The result is arithmetic on your assumptions, not a lender’s approval amount.
What changes the result most
- Interest rate
- At $500 a month for 5 years, 4% supports $27,149.53 of principal and 8% supports $24,659.22, against $25,862.78 at 6%. Each 2 points moves the amount by about $1,200 to $1,300.
- Term length
- The same $500 supports $21,290.16 over 4 years, $30,169.76 over 6, and $34,226.52 over 7. The 7-year figure comes with $7,773.48 of interest, against $4,137.22 over 5 years.
- Payment limit
- Principal scales in direct proportion to the payment. Raising the limit from $500 to $600 at 6% for 5 years raises the supported principal by $5,172.56 to $31,035.34.
Questions
Is the result the amount a lender will approve?
No. It only reverses a payment equation using your assumptions. Approval uses additional underwriting and product rules.
Why does a longer term increase the amount?
More payment periods support more principal, but the borrower may pay substantially more interest over the longer term.
How are upfront fees treated?
They are added to the separate cash-needed estimate and do not change the principal supported by the payment. A loan that finances fees needs a different amount-financed assumption.
Can I use it for a car loan?
Yes. Enter the car payment you can handle, the loan rate, and the term to see the loan amount it supports. It covers principal and interest only, so add your down payment and trade-in, and budget separately for sales tax, fees, insurance, and running costs; the auto loan calculator models tax and fees.
How much of my income should go to loan payments?
No single rule applies. Lenders look at the debt-to-income ratio, the share of gross monthly income that goes to debt payments, and set their own limits by loan type. The debt-to-income calculator shows how a new payment changes that ratio; a budget that also covers savings, insurance, and irregular costs gives a fuller picture than any ratio.
More in Loans & debt
Sources
These references explain the concepts behind the calculation. They do not endorse this site. Estimates leave out any cost or condition you did not enter.