How Much Loan Can I Afford? Try Our Affordability Calculator

Find out how much you can afford to borrow based on your financial situation

Loan Affordability Calculator

Find out how much you can afford to borrow based on your income and existing debts.

Your total monthly income before taxes and deductions.

Include car loans, student loans, credit cards, and other debt payments.

Include rent, utilities, food, insurance, and other regular expenses.

What Affects Your Loan Affordability? (Key Factors Explained)

Key Factors That Determine How Much You Can Borrow

Income and Employment

Your income is the primary factor in determining how much you can borrow. Lenders typically look at your gross monthly income and employment stability. A higher, stable income increases your borrowing power.

Existing Debt

Your current debt obligations, including credit cards, student loans, and other loans, reduce the amount you can borrow. Paying down existing debt before applying for a new loan can significantly increase your borrowing capacity.

Credit Score

Your credit score affects both your loan eligibility and the interest rate you'll receive. A higher credit score typically means better rates, which increases how much you can afford to borrow.

Loan Terms

The loan's interest rate and term length significantly impact affordability. Lower rates and longer terms reduce monthly payments, allowing you to borrow more, though longer terms mean paying more interest over time.

What Is a Good Debt-to-Income (DTI) Ratio for Loans?

Your debt-to-income ratio is a key metric lenders use to determine how much you can afford to borrow. It compares your monthly debt payments to your monthly gross income.

DTI Formula:

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100%

Good DTI

Below 36%

Excellent loan options

Acceptable DTI

36% - 43%

Standard loan options

High DTI

Above 43%

Limited loan options

Loan Affordability Frequently Asked Questions (DTI, Income, Credit & Approval Limits)

Loan affordability is typically calculated using debt-to-income ratio (DTI) and payment-to-income ratio (PTI). DTI compares your total monthly debt payments to your monthly income, while PTI focuses specifically on how much of your income would go toward the new loan payment. Lenders typically want your DTI to stay below 43% and your PTI to stay below 28% for mortgages or 15% for other loans.
A good debt-to-income ratio is typically below 36%. Most lenders prefer a DTI of 36% or less, though some loan programs allow up to 43% or even 50% in special cases. A lower DTI indicates less financial stress and higher loan affordability.
Your credit score affects both the interest rate you'll qualify for and the loan amount you can borrow. A higher credit score typically means lower interest rates, which increases your borrowing power. Additionally, lenders may allow higher debt-to-income ratios for borrowers with excellent credit, further increasing the maximum loan amount.
It's generally not recommended to borrow the maximum amount you qualify for. Lenders' calculations don't account for all your personal financial goals, such as saving for retirement, education, or emergencies. Borrowing less than your maximum gives you financial flexibility and reduces stress if your income changes or unexpected expenses arise.
To increase your loan affordability, you can: 1) Increase your income through raises, side jobs, or adding a co-borrower, 2) Reduce existing debt by paying down credit cards or other loans, 3) Improve your credit score to qualify for better interest rates, 4) Save for a larger down payment, or 5) Extend the loan term (though this increases total interest paid).

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