Loan Affordability Calculator
Work backwards from the monthly payment you can comfortably afford to the loan amount it buys — plus the total interest that payment carries.
How it works
Loan amount = payment × (1 − (1 + r)^−n) ÷ r, where r = APR ÷ 12 and n = years × 12 · If r = 0: loan = payment × n · Interest = payment × n − loan
This reverses the standard amortization formula: instead of computing a payment from a loan, it finds the largest loan a fixed payment can service. A longer term or lower rate lets the same payment support a bigger loan, but stretching the term also piles on interest — so the "affordable" loan and the "cheap" loan are rarely the same. Use the payment you can sustain even in a tight month, not the maximum a lender will approve.
Worked example
A $400 monthly payment at 7% APR over 5 years (60 payments): with r = 0.005833, the loan is 400 × (1 − 1.005833⁻⁶⁰) ÷ 0.005833 ≈ $20,200. You pay $400 × 60 = $24,000 in total, so about $3,800 is interest — roughly 19% of the loan.
Frequently asked questions
Is this the same as what a lender will approve?
Not quite. Lenders also weigh your total debt-to-income ratio, credit score and down payment. This shows the loan a given payment mathematically supports, which is a useful ceiling to bring to any lender.
Should I pick the longest term for a bigger loan?
A longer term lets the same payment buy more, but you pay far more interest and stay in debt longer. Choose the shortest term whose payment you can comfortably afford.
Does this include taxes and insurance?
No — it covers only principal and interest. For a mortgage or car loan, set aside part of your budget for taxes, insurance and fees before deciding what payment is truly affordable.
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Educational estimate, not financial advice.