This PAYE (Pay As You Earn) Loan Calculator helps you estimate how much you might be able to borrow based on your income and essential outgoings, particularly focusing on your net take-home pay after tax and deductions. Lenders often assess affordability by looking at your disposable income – the money left after covering your taxes, essential living costs, and other financial commitments.
How it Works:
The calculator estimates your net monthly income and then subtracts your committed monthly expenses (rent and other deductions) to determine your disposable income. This disposable income is a key factor lenders consider when deciding whether to approve a loan and how much they might offer.
The Calculation Behind the Calculator:
While exact tax calculations can be complex due to varying tax codes, National Insurance contributions, and pension schemes, this calculator uses a simplified approach to estimate your net income and assess affordability:
Annual Income (£): The gross amount you earn before any deductions.
Estimated Net Monthly Income (£): This is approximated by taking your Annual Income, dividing it by 12 to get monthly gross income, and then applying a general reduction for income tax and National Insurance. For simplicity in this calculator, we estimate a deduction of approximately 25-30% from the gross monthly income to approximate Net Income after standard PAYE deductions. A more precise calculation would require individual tax codes and specific deduction rates.
Monthly Rent (£): Your essential housing cost.
Other Monthly Deductions (£): This includes regular payments like pension contributions, student loan repayments, and other savings schemes that reduce your available funds.
Total Monthly Outgoings (£) = Monthly Rent + Other Monthly Deductions
Estimated Monthly Disposable Income (£) = Estimated Net Monthly Income – Total Monthly Outgoings
Loan Affordability (£): Lenders typically allow a portion of your disposable income to be used for loan repayments. This calculator assumes that a lender might consider a loan affordable if the estimated monthly repayment does not exceed 30-50% of your estimated monthly disposable income.
Estimated Monthly Loan Payment (£): Based on the desired loan amount and term, this is calculated using the standard loan payment formula.
Formula for Estimated Monthly Loan Payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
n = Total Number of Payments (Loan Term in Months)
(Note: This calculator does *not* currently include an interest rate for the loan repayment calculation to simplify the focus on income-based affordability. A real loan would include interest.)
Important Considerations:
This is an ESTIMATE. Actual loan approval and amounts depend on the specific lender's policies, your credit score, income stability, other debts, and a full affordability assessment.
Tax rates and National Insurance contributions vary. For precise net income, consult your payslip or use a dedicated tax calculator.
This calculator assumes a basic PAYE deduction. If you are self-employed or have complex tax situations, this calculator may not be suitable.
Lenders will also consider your credit history.
Use this tool as a guide to understand your borrowing potential based on your income and essential outgoings. Always consult with financial advisors or lenders for personalized advice.
function calculatePayeLoan() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyRent = parseFloat(document.getElementById("monthlyRent").value);
var otherDeductions = parseFloat(document.getElementById("otherDeductions").value);
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var loanTermMonths = parseInt(document.getElementById("loanTermMonths").value);
var loanAffordabilityResultElement = document.getElementById("loanAffordabilityResult");
var monthlyPaymentResultElement = document.getElementById("monthlyPaymentResult");
// Clear previous results
loanAffordabilityResultElement.textContent = "–";
monthlyPaymentResultElement.textContent = "–";
// Input validation
if (isNaN(annualIncome) || annualIncome <= 0 ||
isNaN(monthlyRent) || monthlyRent < 0 ||
isNaN(otherDeductions) || otherDeductions < 0 ||
isNaN(loanAmount) || loanAmount <= 0 ||
isNaN(loanTermMonths) || loanTermMonths 0) {
// Standard Amortization Formula (simplified for 0% interest)
// M = P / n
estimatedMonthlyPayment = loanAmount / loanTermMonths;
}
// — Display Results —
if (estimatedMonthlyDisposableIncome > 0) {
loanAffordabilityResultElement.textContent = "£" + estimatedMonthlyDisposableIncome.toFixed(2) + " Disposable Income";
monthlyPaymentResultElement.textContent = "Estimated max monthly repayment capacity: £" + estimatedLoanAffordability.toFixed(2) +
" (based on " + (affordabilityUpperBound / estimatedMonthlyDisposableIncome * 100).toFixed(0) + "% of disposable income)";
// Add comparison or recommendation based on desired loan
if (estimatedMonthlyPayment > 0) {
if (estimatedMonthlyPayment <= affordabilityUpperBound) {
monthlyPaymentResultElement.innerHTML += "The estimated monthly payment (£" + estimatedMonthlyPayment.toFixed(2) + ") for your desired loan appears manageable within your estimated disposable income.";
} else {
monthlyPaymentResultElement.innerHTML += "The estimated monthly payment (£" + estimatedMonthlyPayment.toFixed(2) + ") for your desired loan may be higher than your estimated repayment capacity.";
}
}
} else {
loanAffordabilityResultElement.textContent = "£0.00 Disposable Income";
monthlyPaymentResultElement.textContent = "You may not have sufficient disposable income to afford additional loan repayments.";
}
}