How much can I afford to borrow?

How affordability actually works

Lenders care about two things when evaluating affordability: can you make the payment, and will making the payment leave you stable enough to keep paying through the term. The standard tool for this is the debt-to-income (DTI) ratio.

Total your monthly debt obligations — rent or mortgage, car payment, credit card minimums, existing loan payments — and divide by your gross monthly income. The result is your back-end DTI. The general thresholds:

• Below 28% — comfortable. Significant margin for unexpected expenses.
• 28-36% — acceptable. The standard zone most lenders are happy with.
• 36-43% — stretched. You can usually still get approved but less margin for surprises.
• Above 43% — high risk. Some subprime lenders go this far, but default rates climb.

This calculator targets 36% — the upper edge of the comfortable zone. Going higher is possible (many subprime lenders approve up to 50% DTI), but the loan amount this calculator suggests is the one you can realistically afford without restructuring your other expenses.

Why the term length matters

For the same loan amount and APR, a longer term means a smaller monthly payment. So if you're constrained by what fits in your DTI, stretching to a longer term lets you borrow more. The trade-off is total cost: longer terms accumulate more total interest.

For example, at 36% APR with $400/month available for a new payment:

• 12-month term: max loan around $4,000, total cost around $4,800
• 24-month term: max loan around $6,300, total cost around $9,500
• 36-month term: max loan around $7,600, total cost around $14,400

You can borrow nearly twice as much over 36 months as over 12, but you'll pay three times as much in interest. The trade-off makes sense if you genuinely need the larger amount and have a plan to pay it down faster than the schedule requires. It makes less sense if you're just optimizing for the lowest monthly number.

What the calculator doesn't account for

A few factors that affect real affordability but aren't in the DTI calculation:

• Variable expenses. Groceries, gas, medical bills, childcare. The 36% threshold assumes these fit comfortably in the other 64% of your income. If your non-debt expenses are unusually high, you can afford less than the calculator suggests.
• Income stability. The calculator treats current income as constant. If your income is variable (gig work, commission, irregular schedule), be more conservative.
• Emergency fund. Borrowing right up to your DTI ceiling leaves no slack for unexpected expenses. If you don't have $500-$1,000 in liquid savings, leave more room than the calculator suggests.
• Credit profile. Lenders won't necessarily approve the amount the calculator suggests. Approval depends on credit score, employment history, and other underwriting factors. The calculator tells you what you can afford; the lender decides what they'll lend.

Using this realistically

The output of this calculator is the amount you can comfortably take on without overstretching. If your need is larger than that amount, the right move is usually to find a way to reduce the need (lower the loan amount, find a partial alternative, defer a portion) rather than to take on more debt than fits in your budget.

Subprime lenders make most of their money from borrowers who default and pay through collections rather than from borrowers who pay on schedule. Borrowing within your means is the single biggest factor in whether a loan helps you or hurts you over time.