1. What is the Personal Loan Eligibility Calculator?

The Personal Loan Eligibility Calculator determines the maximum loan amount you can afford based on your budgeted monthly payment, interest rate, and loan term. It helps you understand your borrowing capacity before applying for a loan.

2. How Does the Calculator Work?

The calculator uses the loan eligibility formula:

Where:

• \( P \) — Maximum loan principal (USD)
• \( PMT \) — Affordable monthly payment (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Loan term in months

Explanation: The formula calculates the present value of a series of future payments at a given interest rate, showing how much you can borrow while staying within your budget.

3. Importance of Loan Eligibility Calculation

Details: Knowing your maximum eligible loan amount helps in financial planning, prevents over-borrowing, and improves loan approval chances by matching applications with your repayment capacity.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: How accurate is this calculator?
A: It provides a close estimate, but final loan amounts may vary based on lender policies, credit score, and other factors.

Q2: Should I include other debts in my payment?
A: Yes, your affordable payment should account for all monthly debt obligations to avoid overextension.

Q3: How does interest rate affect eligibility?
A: Higher rates reduce the amount you can borrow for the same payment, as more goes toward interest.

Q4: What's a typical loan term?
A: Personal loans typically range from 12-84 months, with longer terms lowering payments but increasing total interest.

Q5: Can I use this for other loan types?
A: The formula works for any installment loan with fixed payments, including auto loans and mortgages.