1. What is the Personal Loan Calculator?

The Personal Loan Calculator determines how much you can borrow based on your salary and what you can afford to pay monthly. It helps you plan loans while staying within your budget.

2. How Does the Calculator Work?

The calculator uses the loan amount formula:

Where:

• \( P \) — Loan principal amount (USD)
• \( PMT \) — Affordable monthly payment (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12 ÷ 100)
• \( n \) — Loan term in months

Explanation: The formula calculates the maximum loan amount you can get based on what you can afford to pay each month, considering the interest rate and loan duration.

3. Importance of Loan Calculation

Details: Proper loan calculation helps prevent overborrowing, ensures monthly payments fit your budget, and helps compare different loan offers.

4. Using the Calculator

Tips: Enter your comfortable monthly payment amount, the annual interest rate offered, and the loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does salary affect loan amount?
A: Your salary determines how much you can afford to pay monthly (PMT). Higher salary typically allows for higher PMT and thus larger loan amounts.

Q2: What's a good interest rate for personal loans?
A: Rates vary by credit score. As of 2023, good credit (700+) typically gets 10-15%, excellent credit (750+) 6-10%, and fair credit 15-25%.

Q3: How long should my loan term be?
A: Shorter terms (12-36 months) mean higher payments but less interest paid overall. Longer terms (60-84 months) lower payments but increase total interest.

Q4: What percentage of my salary should go to loan payments?
A: Financial advisors typically recommend keeping all debt payments (including loans) below 35-40% of your gross monthly income.

Q5: Does this include taxes and insurance?
A: No, this calculates principal and interest only. Some loans may have additional fees that would reduce the amount you can borrow.