1. What is Personal Loan Borrowing Capacity?

Personal loan borrowing capacity refers to the maximum amount an individual can borrow based on their disposable income and the annual percentage rate (APR). It helps determine affordable loan amounts while considering repayment capabilities.

2. How Does the Calculator Work?

The calculator uses the personal loan formula:

Where:

• Disposable Income — Monthly disposable income in currency
• APR — Annual Percentage Rate (%)
• 24 — Represents 24 months (2 years) repayment period

Explanation: The formula calculates the maximum loan amount by multiplying monthly disposable income by 24 months and dividing by the APR percentage (converted to decimal).

3. Importance of Loan Capacity Calculation

Details: Calculating borrowing capacity helps individuals understand their loan eligibility, avoid over-borrowing, and maintain financial stability by ensuring repayments remain affordable.

4. Using the Calculator

Tips: Enter your monthly disposable income and the annual percentage rate (APR). Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is considered disposable income?
A: Disposable income is the amount of money left after deducting taxes and essential living expenses from gross income.

Q2: Why use 24 months in the calculation?
A: 24 months represents a typical 2-year repayment period for personal loans, though actual terms may vary by lender.

Q3: How does APR affect borrowing capacity?
A: Higher APR reduces borrowing capacity as more of the payment goes toward interest rather than principal repayment.

Q4: Are there other factors that affect loan eligibility?
A: Yes, lenders also consider credit score, employment history, existing debts, and collateral when determining loan approval and amounts.

Q5: Should this calculation be used for all types of loans?
A: This calculation is specifically designed for unsecured personal loans. Mortgage and auto loans have different qualification criteria.