How Much Can I Borrow — Personal Loan Australia

How much you can borrow for a personal loan in Australia is not determined by income alone — it comes from a specific formula that lenders run on every application. Most people underestimate their borrowing capacity or overestimate it, because they don't know two things: that their total credit card limits count against them (not just their balance), and that Buy Now Pay Later spending is treated as a formal debt. This article explains exactly how the calculation works, with a real worked example, so you can estimate your own figure before you apply.

What the calculation considers — at a glance

Lenders assess borrowing capacity by working out how much is left from your income after living expenses and existing debts — then calculating what loan repayment that surplus can support.

The inputs are:

Gross (before-tax) income
Minimum living expenses (set by a benchmark called HEM)
Monthly rent or mortgage repayment
Existing loan repayments
3% of your total credit card limits — not your balance
BNPL monthly repayments
Number of dependants
Loan term (years)

How lenders calculate your borrowing capacity

The calculation has two layers: serviceability and DTI.

Serviceability answers: after your income covers living costs and existing debts, is there enough left to make the new loan repayment each month?

DTI (debt-to-income ratio) answers: what percentage of your gross income is already committed to debts? If the answer exceeds 50%, the application won't pass — regardless of how healthy the serviceability number looks.

Definition — serviceability: Serviceability is a lender's assessment of whether a borrower's net income, after minimum living expenses and existing debt repayments, is sufficient to meet the proposed new loan repayment. It is calculated at the gross income level and benchmarked against HEM — the Household Expenditure Measure, a standardised minimum living cost figure that varies by number of dependants.

Definition — HEM (Household Expenditure Measure): HEM is a minimum living expense benchmark lenders use when a borrower's declared expenses are lower than a reasonable threshold. The HEM figures used in our tool: 0 dependants — $2,500/month; 1 dependant — $3,000/month; 2 dependants — $3,400/month.

Both tests must pass. Meeting one but not the other is not enough.

Worked example — how the numbers actually work

Let's work through a real scenario.

The situation:

Gross income: $80,000 per year ($6,667/month)
Net (after-tax) income: approximately $5,100/month
0 dependants → HEM: $2,500/month
Rent: $1,600/month
Credit card limit: $6,000 → monthly obligation: $180 (3% of $6,000)
No existing loans
No BNPL
Loan term: 5 years

Step 1 — calculate the available surplus:

` Net income: $5,100 Less HEM: −$2,500 Less rent: −$1,600 Less card obligation: −$180 ───────────────────────── Available surplus: $820/month `

Step 2 — what loan repayment does $820/month support?

At a 12% annual interest rate over 5 years (60 months), $820 per month supports a loan of approximately $37,000.

Step 3 — DTI check:

` Existing debts + proposed repayment: $1,600 + $180 + $820 = $2,600 Gross monthly income: $6,667 DTI: $2,600 ÷ $6,667 = 39% `

39% is under the 50% cap — the application passes the DTI test.

Safe borrowing amount: ~$37,000

This is the figure our Borrowing Capacity Calculator calls the "safe borrowing amount" — what you can comfortably borrow based on the affordability formula.

The calculator also produces a broker amount — the upper ceiling that a specialist may be able to reach, calculated at a 15% uplift on the safe amount (~$42,500 in this example). This figure is flagged as "speak to a specialist" because it represents the ceiling, not the midpoint.

The credit card limit trap

Here is the part most people don't know: lenders count 3% of your total credit card limit as a monthly debt obligation — regardless of what your balance actually is.

If you have a $6,000 credit card that you pay off in full every month, the lender still counts $180 per month in your debt obligations ($6,000 × 3% = $180).

Why it matters:

Take the same scenario above — $80,000 income, 0 dependants, $1,600 rent — but now add a second credit card with a $10,000 limit that you barely use:

` Net income: $5,100 Less HEM: −$2,500 Less rent: −$1,600 Less card 1 ($6,000): −$180 Less card 2 ($10,000): −$300 ───────────────────────────── Available surplus: $520/month `

$520/month at 5 years at 12% supports a loan of approximately $23,400 — compared to $37,000 before.

An unused $10,000 credit card reduced borrowing capacity by over $13,000.

Definition — credit card obligation rate: Australian lenders apply a standard rate of 3% of the total approved credit card limit per month as a debt obligation in the serviceability assessment, regardless of the balance carried or whether the card is paid off monthly. This is an industry-wide convention, not a lender-specific rule.

The fix: If you have credit cards with limits you don't actively need, consider reducing the limit or closing the card before you apply for a personal loan. The impact on your credit score is minimal; the impact on your borrowing capacity can be significant.

BNPL is counted as a liability

Buy Now Pay Later services — Afterpay, Zip, Humm, and similar platforms — are included in the serviceability assessment. Lenders treat your monthly BNPL repayment obligations as a debt, not a spending preference.

How much it affects the calculation:

Using the same scenario — $820/month available — now add $200/month in BNPL repayments:

` Available surplus before BNPL: $820 Less BNPL obligations: −$200 ───────────────────────────── Adjusted surplus: $620/month `

$620/month at 5 years at 12% supports a loan of approximately $27,900 — compared to $37,000 without BNPL.

$200/month in BNPL spending reduces borrowing capacity by roughly $9,000.

If your BNPL repayments are high enough that the residual falls to zero or below, the application fails on serviceability grounds — even if your credit score and DTI are both healthy. This is the BNPL affordability test that many people don't know exists.

Before you apply: Review your open BNPL accounts. Close any you no longer use. Unlike credit cards, most BNPL accounts can be closed with minimal process and minimal impact on your credit score.

DTI — the 50% cap explained

Your debt-to-income ratio (DTI) is a separate check that runs alongside serviceability.

Definition — debt-to-income ratio (DTI): DTI is calculated as your total monthly debt repayments (existing loans + credit card obligations + rent/mortgage + the proposed new loan repayment) divided by your gross monthly income, expressed as a percentage. Lenders apply a standard cap of 50%: if your DTI exceeds this threshold, the application will not proceed regardless of the serviceability result.

Even if the serviceability calculation shows a surplus, a DTI above 50% is a hard stop.

Example: If you earn $5,000/month gross and your total monthly debts (including the proposed new loan) add up to $2,600, your DTI is 52% — above the cap. You would need to either reduce your existing debts, apply for a smaller loan, or increase income before the application would pass.

The good news: for most people with a moderate income and no large existing debts, the DTI check is easier to pass than the serviceability test. But if you are carrying a car loan, multiple credit cards, and rent, the DTI can become the binding constraint even when serviceability looks fine on paper.

See your own borrowing capacity — Borrowing Capacity Calculator

Enter your income, employment type, existing debts, credit card limits, and BNPL spending. The calculator runs both the serviceability and DTI tests and returns your safe borrowing amount, your broker ceiling, and a classification with a plain-English explanation.

Results are estimates based on the formula above. Actual lender decisions may vary.

Safe amount vs broker amount — understanding the two outputs

The Borrowing Capacity Calculator produces two figures, not one.

Safe borrowing amount is what the serviceability formula says you can comfortably afford given your income and debts. This is the figure to use when planning an application.

Broker amount is a 15% uplift on the safe amount — the ceiling that a broker with access to a wide lender panel may be able to negotiate, given that lenders apply slightly different affordability benchmarks and some have more flexibility in how they weight income types or household expenses.

This second figure is not a target — it is a ceiling. It is flagged as "speak to a specialist" in the calculator output because reaching it typically requires understanding which specific lenders have the most suitable criteria for your situation. This is what a broker does.

Frequently asked questions

Does my credit score affect how much I can borrow?

Your credit score affects two things: whether a lender will assess your application at all (the approval threshold), and what interest rate they will offer you. A higher rate increases your monthly repayment, which reduces the loan amount that the surplus can support. So yes — a lower credit score typically means a lower borrowing capacity, even if your income and debts are unchanged, because the higher rate means each dollar of monthly surplus supports a smaller loan.

How much can I borrow for a personal loan with bad credit in Australia?

This depends on your specific Equifax score, income, and existing debts. With a score between 500 and 649, lenders may still assess your application, but at a higher interest rate — which reduces the loan amount a given monthly surplus can support. The Loan Approval Calculator includes your credit score in the assessment and returns an outcome classification alongside a borrowing estimate.

Does being self-employed affect how much I can borrow?

Yes — employment type and duration affect whether you pass the employment threshold check. Self-employed applicants with less than 6 months of trading history are in the Unlikely — needs improvement band on employment alone. At 6–11 months, Possible — lender dependent. At 12 months or more, the employment check passes and borrowing capacity is calculated from income in the normal way. Lenders also assess self-employed income differently — typically from tax returns or BAS statements rather than payslips.

Does the number of dependants affect borrowing capacity?

Yes — the HEM benchmark increases with each dependant, which reduces the surplus available for loan repayments. 0 dependants: $2,500/month HEM. 1 dependant: $3,000/month. 2 dependants: $3,400/month. Each additional dependant reduces the calculated surplus, which reduces the safe borrowing amount.

Should I pay off my credit card before applying?

Paying down the balance helps your cash flow but doesn't change what lenders count. The obligation they use is 3% of your total credit card limit — not your balance. If you want to improve your borrowing capacity, the more effective action is to reduce the credit limit itself, or to close a card you don't need, before you apply.

What is the maximum personal loan amount available in Australia?

Most standard personal lenders offer up to $50,000–$75,000 for unsecured personal loans, though some specialist lenders go higher. However, the amount you can actually access is constrained by the serviceability and DTI formula — and for most income levels, the formula produces a safe borrowing amount well below the lender's product maximum. Your borrowing capacity is determined by your financial position, not by the lender's product ceiling.