Calculate how much loan you can afford based on income and expenses. Free online loan affordability calculator with formula, examples, and FAQ.
Before taking on a loan, it's crucial to know how much you can actually afford. The loan affordability calculator determines the maximum loan amount you can comfortably borrow based on your income, existing expenses, interest rate, and loan term. It uses the standard 40% debt-to-income ratio guideline that most lenders follow, ensuring your EMI doesn't strain your finances.
Max EMI = min(40% of Income, Income - Expenses) | Max Loan = EMI × [(1+r)^n - 1] / [r × (1+r)^n]The maximum EMI is limited by two constraints: it shouldn't exceed 40% of your monthly income (lender's criteria), and it must be affordable after your living expenses. The maximum loan amount is then calculated using the inverse of the EMI formula, determining how much principal can be supported by that EMI at the given rate and term.
| Input | Output |
|---|---|
| Income: $6,000/month, Expenses: $3,000/month, Rate: 8%, Term: 20 years | Max EMI: $2,400, Max Loan: ~$292,000 |
| Income: $4,000/month, Expenses: $2,500/month, Rate: 10%, Term: 15 years | Max EMI: $1,500, Max Loan: ~$140,000 |
| Income: $10,000/month, Expenses: $4,000/month, Rate: 7%, Term: 25 years | Max EMI: $4,000, Max Loan: ~$566,000 |