Determine how much personal loan you can safely afford based on your income, expenses, and debt-to-income ratio.
Enter your financial information to calculate how much personal loan you can afford.
A debt-to-income ratio of 36% or lower is considered excellent, while 40% is generally acceptable. Ratios above 40% may indicate financial stress and could make it difficult to qualify for additional credit.
Financial experts recommend that total debt payments (including credit cards, loans, and mortgages) should not exceed 36-40% of your gross monthly income. For personal loans specifically, aim for no more than 10-15% of your income.
Lenders consider credit score, income stability, debt-to-income ratio, employment history, and existing debts. A higher credit score and lower DTI ratio typically result in better interest rates and higher loan amounts.
If your DTI ratio is above 40%, consider paying down existing debt first. However, if you're consolidating high-interest debt with a lower-rate personal loan, it might make financial sense to proceed with the loan.