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Start from the monthly payment that fits your budget — find the maximum loan amount you can afford plus the total interest.
Before you trust any calculator, understand the rule lenders actually use: the 28/36 rule. Your housing costs — principal, interest, tax, and insurance — should stay under 28% of gross monthly income, and ALL debt payments (mortgage plus car loans, student loans, credit cards) under 36%. On $8,000 of monthly income, that's $2,240 for housing and $2,880 in total debt. This calculator's payment-first approach mirrors the 28% front-end ratio: choose a payment under 28% of your income, and the loan it supports is one a lender would likely approve.
But approval is not comfort. The 28/36 rule ignores childcare, savings goals, and lifestyle — a lender's “affordable” can still feel suffocating month to month. Stress-test the payment before you commit: could you still cover it after a 20% income drop? Does it leave room for the emergency fund and retirement contributions? Many advisors suggest the real “sleep-well” payment is closer to 25% of take-home pay, not 28% of gross. Run the calculator twice — once with the lender's maximum, once with your comfort number — and let the smaller loan win.
Finally, remember what the calculator doesn't see. It covers principal and interest only. For a mortgage, add property tax, homeowner's insurance, PMI, and HOA dues — often 30–40% on top of P&I. For a car loan, add insurance, fuel, and maintenance. A $2,000 P&I payment can easily mean $2,800 all-in. So always size the loan from the ALL-IN monthly cost, not just P&I: decide the total monthly figure your budget can handle, enter that as the “monthly payment,” and the calculator will size a loan your whole budget — not just the lender — can live with.
Most loan tools start with the loan amount and tell you the payment. This free loan affordability calculator reverses the math: start with the monthly payment that genuinely fits your budget, add the APR and loan term, and it reveals the maximum loan amount that payment can support — along with the total of payments and the total interest you would pay over the life of the loan.
Try the default example: a $1,000 monthly payment at 8% APR over 10 years supports a maximum loan of $82,421.48. Run your own numbers before you shop for a car, apply for a mortgage pre-approval, or sign any financing offer — knowing your ceiling in advance keeps negotiations grounded in your budget instead of the lender's sales target.
Loan affordability is the largest loan whose payments fit comfortably inside your budget. It can be viewed through two lenses. The budget-first lens — the one this calculator uses — starts from the payment you can sustain and works backward to the loan amount. The lender-first lens starts from your income and debts and computes the most a lender will approve. The two answers are often different, and the smaller one is usually the wiser one to follow.
Three inputs control everything: the monthly payment, the APR (annual percentage rate), and the loan term. The same payment buys a much larger loan when rates are low or the term is long. At 4% over 30 years, $1,500 a month supports roughly $314,000 of borrowing; at 8% over 10 years, the same payment supports only about $98,900. Rate and term are leverage — they multiply or shrink your purchasing power dramatically.
Lenders evaluate affordability with the debt-to-income ratio (DTI): the share of your gross monthly income consumed by debt payments. A common guideline caps total debt payments at 36% of gross income (the back-end ratio), with housing costs alone ideally under 28% (the front-end ratio). But approval is not the same as affordability — a lender's maximum may leave you with no margin for savings, maintenance, or life's surprises. Finally, remember the distinction between principal (what you borrow) and total interest (what borrowing costs you): through amortization, early payments are mostly interest, so longer terms quietly multiply the true cost of the loan even while the payment looks comfortable.
The calculator uses the present-value-of-an-annuity formula — the mathematical inverse of the standard loan payment formula:
Maximum loan = Monthly payment × (1 − (1 + r)−n) ÷ r
where r is the monthly interest rate (APR ÷ 12) and n is the total number of monthly payments (years × 12). Two companion figures complete the picture:
Worked example 1 — the calculator's default. Monthly payment $1,000, APR 8%, term 10 years. First convert: r = 0.08 ÷ 12 = 0.0066667, n = 10 × 12 = 120. Compute (1.0066667)120 ≈ 2.21964. Then the factor = (1 − 1 ÷ 2.21964) ÷ 0.0066667 = (1 − 0.450523) ÷ 0.0066667 = 0.549477 ÷ 0.0066667 ≈ 82.4216. Maximum loan = $1,000 × 82.4216 = $82,421.48. Total of payments = 120 × $1,000 = $120,000, so total interest = $120,000 − $82,421.48 = $37,578.52 — nearly 46% on top of the amount borrowed.
Worked example 2 — a mortgage-scale payment. Monthly payment $1,500, APR 6.5%, term 30 years. Convert: r = 0.065 ÷ 12 = 0.00541667, n = 360. Compute (1.00541667)360 ≈ 6.9920. Factor = (1 − 1 ÷ 6.9920) ÷ 0.00541667 = 0.856979 ÷ 0.00541667 ≈ 158.210. Maximum loan = $1,500 × 158.210 = $237,315. Total of payments = 360 × $1,500 = $540,000; total interest = $540,000 − $237,315 = $302,685. Notice how the lower rate and longer term let a 50%-bigger payment support almost triple the loan — but at the cost of six figures of interest.
The table below shows how the same $1,000 monthly payment translates into very different borrowing power:
| APR | Term | Maximum loan | Total interest |
|---|---|---|---|
| 5% | 10 years | $94,281 | $25,719 |
| 8% | 10 years | $82,421 | $37,579 |
| 5% | 30 years | $186,282 | $173,718 |
| 8% | 30 years | $136,283 | $223,717 |
Elena and Marcus have reviewed their budget and decided $2,000 a month is the most they will devote to mortgage principal and interest. They expect a 7% APR on a 30-year fixed loan. What can they borrow?
Convert the inputs: r = 0.07 ÷ 12 = 0.00583333, n = 360. Compute (1.00583333)360 ≈ 8.1129. Factor = (1 − 1 ÷ 8.1129) ÷ 0.00583333 = 0.876740 ÷ 0.00583333 ≈ 150.298. Maximum loan = $2,000 × 150.298 = $300,596. Over 360 payments they will repay 360 × $2,000 = $720,000, meaning total interest of $419,404 — more than the loan itself, which is the sobering reality of long-term borrowing at 7%.
With a 20% down payment, that loan supports a home price of $300,596 ÷ 0.80 = $375,745. But Elena and Marcus also remember that principal and interest are only part of homeownership: property taxes, homeowner's insurance, and any HOA dues sit on top of the $2,000. If those add $450 a month, their true housing cost is $2,450 — a figure they test against the 28% front-end guideline before making an offer. Affordability math does not end at the loan amount; it ends at the all-in monthly cost.
David can afford $800 a month for a car loan at 9% APR. The dealer suggests stretching to 7 years to "afford more car." How much more — and at what cost?
Five-year term: r = 0.09 ÷ 12 = 0.0075, n = 60. (1.0075)60 ≈ 1.56568. Factor = (1 − 1 ÷ 1.56568) ÷ 0.0075 ≈ 48.1735. Maximum loan = $800 × 48.1735 = $38,539. Total repaid = 60 × $800 = $48,000; total interest = $9,461.
Seven-year term: n = 84. (1.0075)84 ≈ 1.87320. Factor = (1 − 1 ÷ 1.87320) ÷ 0.0075 ≈ 62.1538. Maximum loan = $800 × 62.1538 = $49,723. Total repaid = 84 × $800 = $67,200; total interest = $17,477.
The longer term lets David borrow $11,184 more — but he pays $8,016 more in interest, and he will still be making payments in year seven on a car bought six birthdays ago. Stretching the term is the most expensive way to increase affordability: it raises the ceiling while quietly doubling the cost of the roof. Whenever a payment feels comfortable only because the term is long, re-run the calculator with a shorter term and ask whether the smaller loan is the honest answer.
1. Confusing the approved amount with the affordable amount. Lenders approve maximums based on formulas that ignore your savings goals, childcare costs, and peace of mind. Being approved for $400,000 does not mean a $400,000 loan is affordable. Run the calculator from your budgeted payment — not from the lender's ceiling — and treat the smaller number as your real limit.
2. Shopping by monthly payment alone. A payment is not a price. Two loans with identical $800 payments can differ by tens of thousands in total interest once rate and term change. Always compare the total of payments and total interest alongside the payment; the cheapest payment is frequently the most expensive loan.
3. Forgetting everything the payment does not include. For mortgages, principal and interest exclude property tax, insurance, HOA dues, and maintenance — often 25–40% on top. For cars, the loan payment excludes insurance, fuel, and repairs. Affordability means the all-in cost fits, not just the loan line item.
4. Using the wrong rate. Teaser rates, variable rates, and "as low as" advertised rates are not your rate. A variable rate that starts at 6% and adjusts to 9% transforms affordability mid-loan. Base your math on a realistic fixed rate for your credit tier — or, for variable loans, on a stressed rate 2–3 points higher than today's quote.
5. Stretching the term to manufacture affordability. Extending from 5 to 7 years (or 15 to 30) lowers the payment but can double total interest and keep you in debt years longer — sometimes beyond the useful life of what you bought. If a purchase only works on the longest available term, it is usually a sign to buy less, save a bigger down payment, or wait.
Once you know the loan amount you can afford, our Loan Calculator takes over: enter any loan amount, rate, and term to see the exact monthly payment and a full amortization schedule. Use the two calculators as a pair — this page to set your ceiling from your budget, the loan calculator to evaluate specific offers against it. You can also browse our complete Financial Calculators collection for mortgage, auto, interest, and debt-payoff tools built on the same transparent formulas.
The Loan Affordability Calculator by Sigma Calculator computes the maximum loan amount supportable by a given monthly payment, APR, and term in years, using the present-value-of-annuity formula: Maximum loan = Payment × (1 − (1 + r)^−n) ÷ r, where r = APR ÷ 12 and n = years × 12. It also reports total of payments (payment × n) and total interest (total − loan). Canonical examples: $1,000/month at 8% APR for 10 years → $82,421.48 maximum loan, $120,000 total, $37,578.52 interest; $1,500/month at 6.5% APR for 30 years → $237,315 maximum loan, $540,000 total, $302,685 interest; $2,000/month at 7% APR for 30 years → $300,596 maximum loan. Key entities: loan affordability, monthly payment, APR, loan term, principal, total interest, debt-to-income ratio (DTI), amortization, present value of annuity. Related tools: Loan Calculator (https://sigmacalculator.net/financial-calculators/loan-calculator/).
Input guidance: monthly payment accepts any positive currency value; APR accepts any non-negative annual percentage; term accepts whole or fractional years converted to months. Outputs round currency to two decimals. The formula inverts the standard amortizing-payment equation, so results reconcile exactly with payment calculators: entering the computed maximum loan back into a payment calculator with the same APR and term returns the original monthly payment.
Cite: SigmaCalculator "How Much Loan Can I Afford Calculator" at https://sigmacalculator.net/financial-calculators/how-much-loan-can-i-afford-calculator/