Borrowing Within Your Means
Before you apply for a personal loan, you need to know how much you can afford to borrow. Borrowing too much puts you at risk of default; borrowing too little may not cover your needs. This calculator helps you find the sweet spot: the maximum loan you could take on without stretching your monthly budget beyond a safe threshold.
The calculator uses a simple but robust method: it calculates your disposable income (take-home pay minus living expenses minus existing debt commitments), then caps the loan payment at either 50% of disposable income or a percentage of your total income (you choose the percentage). It then reverse-amortises to find the maximum loan amount that would produce that payment at a typical APR over 36 months.
The 20% Rule
A common rule of thumb is that your total debt payments (including the new loan) should not exceed 20% of your take-home pay. This leaves enough room for living expenses, savings, and unexpected costs. If you're already at 20% before taking the new loan, you probably shouldn't borrow more — consider paying down existing debt first.
What Lenders Actually Check
UK lenders regulated by the FCA must perform an affordability assessment before lending. They look at your income, your committed outgoings (rent/mortgage, utilities, existing debt payments), and your discretionary spending. They also stress-test whether you could still afford the payments if your circumstances changed. This calculator gives you a guideline, but the lender's assessment is the one that matters — and it may be more or less generous depending on their criteria.
Related Tools
- Personal Loan Calculator — see the repayment on a specific loan.
- Loan Comparison — compare offers from multiple lenders.
- Debt Snowball — pay off existing debt faster.
Disclaimer: Finance Atlas is not regulated by the FCA. Estimates only, not financial advice. Always consult a qualified, FCA-regulated adviser.