Calculate Money Factor to Interest Rate

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Loan Affordability Calculator

Understanding how much loan you can afford is a crucial step before making any significant purchase, whether it's a car, a home, or financing a business venture. This calculator helps you estimate your maximum loan amount based on your desired monthly payment, estimated interest rate, and loan term.

How Loan Affordability Works

The affordability of a loan is primarily determined by three factors: your desired monthly payment, the interest rate charged by the lender, and the duration of the loan (loan term). A higher monthly payment or a longer loan term generally allows you to borrow more money. Conversely, a higher interest rate will reduce the amount you can borrow for a fixed monthly payment and term.

The formula used in this calculator is derived from the standard loan payment formula, rearranged to solve for the principal loan amount (P):

P = M * [1 - (1 + r)^-n] / r

Where:

  • P = Principal Loan Amount (the maximum you can afford)
  • M = Your desired monthly payment
  • r = Your monthly interest rate (annual rate divided by 12)
  • n = Total number of payments (loan term in years multiplied by 12)

Using the Loan Affordability Calculator

To use the calculator, simply input the following information:

  • Desired Monthly Payment: The maximum amount you are comfortable paying each month towards the loan.
  • Annual Interest Rate (%): The estimated annual interest rate you expect to pay on the loan.
  • Loan Term (Years): The total number of years you plan to take to repay the loan.

Once you enter these details, the calculator will provide an estimate of the maximum loan amount you can afford.

Factors Affecting Loan Approval

While this calculator provides a theoretical maximum, remember that actual loan approval depends on various factors assessed by lenders, including:

  • Your credit score and credit history
  • Your debt-to-income ratio
  • Your employment history and income stability
  • The specific lending institution's policies
  • Any collateral provided for the loan

It's always advisable to speak with a financial advisor or lender to get a precise understanding of your borrowing capacity.









function calculateLoanAffordability() { var monthlyPayment = parseFloat(document.getElementById("monthlyPayment").value); var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value); var loanTermYears = parseFloat(document.getElementById("loanTermYears").value); var resultDiv = document.getElementById("result"); resultDiv.innerHTML = ""; // Clear previous results if (isNaN(monthlyPayment) || isNaN(annualInterestRate) || isNaN(loanTermYears) || monthlyPayment <= 0 || annualInterestRate < 0 || loanTermYears <= 0) { resultDiv.innerHTML = "Please enter valid positive numbers for all fields."; return; } var monthlyInterestRate = annualInterestRate / 100 / 12; var numberOfPayments = loanTermYears * 12; // Formula: P = M * [1 – (1 + r)^-n] / r var loanAmount = monthlyPayment * (1 – Math.pow(1 + monthlyInterestRate, -numberOfPayments)) / monthlyInterestRate; if (isNaN(loanAmount) || !isFinite(loanAmount)) { resultDiv.innerHTML = "Calculation resulted in an invalid number. Please check your inputs."; } else { resultDiv.innerHTML = "

Estimated Maximum Loan Amount:

$" + loanAmount.toFixed(2) + ""; } }

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