Loan Affordability Calculator
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About Our Loan Affordability Calculator
Knowing your affordable loan amount is critical before entering any borrowing decision. Whether shopping for a home, car, or business expansion, understanding the maximum principal you can safely borrow prevents over-extension and financial stress. Our Loan Affordability Calculator reverse-engineers the EMI formula to show you exactly how much you can borrow based on your income, existing obligations, and desired debt-to-income ratio.
The calculator accounts for your net income, existing EMIs, target DTI, interest rates, and loan tenure to provide a realistic borrowing range. Stress-test options let you explore conservative scenarios for financial security. Combined with down payment calculations, you'll know exactly what property price you can target or what purchase you can comfortably make without compromising financial health.
Frequently Asked Questions
How is affordable loan amount calculated?
The calculator uses: (Net Income × Target DTI %) - Existing EMIs = Available for New EMI. Then it reverses the EMI formula to calculate principal. This works mathematically and reflects lender underwriting standards.
What's the difference between net and gross income?
Gross income is salary before taxes/deductions. Net is after-tax take-home. This calculator uses net income for more realistic affordability. Using gross would overstate what you can truly afford after living expenses.
What DTI should I target for financial safety?
Financial advisors typically recommend 30-40% DTI for comfort. Lenders max at 43-50%. Conservative approach: 30-35% leaves room for emergencies and unexpected expenses. Test both scenarios using this calculator.
How do interest rates affect affordable loan amount?
Higher rates increase monthly EMI, reducing affordable principal. A 1% rate increase typically reduces affordable loans by 7-10%. Always get rate quotes before finalizing affordability. Use this calculator with different rates to compare scenarios.
Should I include all existing EMIs?
Yes, all monthly debt obligations: car loans, student loans, personal loans, credit card minimums. Even small recurring debts matter. Higher existing EMIs significantly reduce your new loan affordability. Consider paying off high EMIs before major borrowing.
What does the buffer/stress test option do?
Buffer reduces affordable amount as safety margin. -5% accounts for income uncertainty. -10% provides cushion for emergencies or job loss. Conservative savers use -5% to -10%; aggressive borrowers use 0%. Find your comfort level by testing scenarios.
How does down payment affect property price affordability?
Affordable property price = Affordable Loan Amount + Down Payment. Larger down payments let you target more expensive properties with same loan amount. Higher down payments also reduce interest rates lenders offer. Use this calculator to model different scenarios.
How can I increase my affordable loan amount?
1) Increase income. 2) Pay off existing debts. 3) Get co-borrower with income. 4) Negotiate lower interest rate. 5) Extend tenure (more risky). Test each using this calculator to see impact on affordability.
This says I can't afford what my bank pre-approved me for. Why?
Banks pre-approve at maximum limits (often 43-50% DTI). This calculator uses net income for realistic assessment. Banks may count higher income sources you didn't enter. Conservative approach recommends borrowing less than maximum pre-approval for financial security.
Is my financial data private?
Absolutely. All calculations are local to your browser. We don't send, store, or access any of your financial information. Your income, debts, and affordability calculations remain completely private and secure.