Monthly payment (PMT)
r = APR ÷ 12, n = total months, P = loan amount. Payment = P × r × (1 + r)n ÷ ((1 + r)n − 1). If r = 0, Payment = P ÷ n.
Key ratios
- Loan-to-salary = Loan amount ÷ Annual income.
- Payment-to-income = Monthly payment ÷ Monthly income.
- DTI = (Monthly payment + Other debts) ÷ Monthly income.
- Max principal back-solves from your allowed payment, term, and rate.
- Enter salary and choose monthly or annual frequency.
- Add bonus and other income if it’s dependable.
- Pick gross or net income, and set a tax estimate.
- Enter loan amount, APR, and the loan term.
- Add monthly debts, then set target DTI and payment share.
- Press Calculate, review results above, then export if needed.
| Scenario | Monthly salary | Loan amount | APR | Term | Est. payment | Payment % |
|---|---|---|---|---|---|---|
| Conservative | USD 5,000 | USD 15,000 | 10% | 36 mo | USD 484 | 9.7% |
| Balanced | USD 5,000 | USD 25,000 | 12% | 60 mo | USD 556 | 11.1% |
| Aggressive | USD 5,000 | USD 45,000 | 18% | 72 mo | USD 1,021 | 20.4% |
Numbers are illustrative and rounded for display.
Loan-to-Salary Ratio Benchmarks
Lenders often compare total borrowing to annual income. A ratio near 20–40% is comfortable for unsecured loans, while 50–75% can feel heavy when expenses rise. Example: a 25,000 loan on 60,000 annual income equals 41.7%. Switching to net income can raise ratios by 10–30% if taxes are high. If income is seasonal, test a lower “effective” income to avoid overestimating capacity.
Payment Share Targeting
A practical rule is to keep one loan payment below 10–20% of monthly income, then reserve room for savings and emergencies. Using this calculator, a 556 payment on 5,000 income is 11.1%. If you set a 30% cap, the tool also back-solves the maximum principal that fits the cap at your chosen rate and term. When payments exceed your share, consider a larger down payment or shorter term with a lower rate.
Debt-to-Income Stress Testing
DTI adds other monthly debts to the new payment. Many planners prefer staying under 30–40%, because higher DTI reduces flexibility and raises default risk. Example: 556 payment plus 200 debts on 5,000 income produces a 15.1% DTI. Try increasing debts or lowering income to see how quickly your DTI ceiling is reached.
Rate Sensitivity and Interest Cost
Small APR changes can move total interest materially. On a 25,000, 60‑month loan, raising APR from 12% to 15% increases payment and can add over a thousand in interest, depending on compounding. The amortization table shows early payments are interest‑heavy, so refinancing to a lower rate earlier usually saves more than waiting.
Term Strategy and Break-Even Thinking
Longer terms reduce payment, but they increase total interest and extend risk exposure. A 72‑month term may cut monthly strain, yet it can push interest far above a 36‑month plan. Use the “max allowed payment” output to pick the shortest term that still meets your cashflow limits, then recheck affordability after building an emergency fund.
1) What does the loan-to-salary ratio show?
It compares your loan amount to your annual income. Higher percentages mean more income is needed to repay the balance. Use it as a quick exposure check, then confirm with payment share and DTI.
2) Should I use gross income or net income?
Gross helps compare scenarios consistently. Net is better for cashflow planning because taxes reduce take-home pay. If your tax rate is uncertain, test a range to see how ratios and limits shift.
3) How is the monthly payment estimated?
The calculator uses the standard amortizing payment formula with monthly compounding: APR/12, total months, and principal. The schedule then splits each payment into interest and principal until the balance reaches zero.
4) What DTI level is considered healthy?
Many budgets feel stable below 30–40% total DTI, but it depends on rent, dependents, and savings goals. Set a ceiling you can maintain during stress months, then see the maximum payment and principal.
5) Why can longer terms cost more overall?
Extending the term reduces monthly payment but keeps a larger balance outstanding for longer. That increases the number of interest charges, so total interest paid often rises sharply versus a shorter term.
6) How accurate are the chart and exports?
They are deterministic calculations based on your inputs and assume constant rate, on-time payments, and monthly compounding. Real loans may include fees, insurance, or different compounding. Use exports for planning, not as a lender quote.