How Much Can I Borrow for a Personal Loan?
Borrowing capacity is not a guess — it is a formula. Lenders subtract your committed monthly expenses from your net income. Whatever is left over determines how large a loan repayment you can support. Here is exactly how it works.
The serviceability formula — in plain English
Lenders start with your gross annual income and convert it to a net monthly figure after tax. They then subtract:
- Your monthly rent or mortgage
- 3% of your total credit card limits (not your balance — the limit)
- Existing personal loan and car loan repayments
- Buy Now Pay Later monthly repayments
- A household expenditure allowance based on the number of dependants
Whatever is left over is your serviceability residual. The maximum loan repayment you can support is that residual. Based on the loan term and interest rate, lenders work backwards to determine the loan amount.
The credit card limit insight — most people miss this
A $10,000 credit card limit reduces your borrowing capacity by $300 per month in the lender's calculation — even if you pay the card in full each month and carry no balance. Closing or reducing unused credit card limits can meaningfully increase your capacity.
Worked example — with specific numbers
Example: $80,000 income, $1,500 rent, $10,000 credit card limit
* Rate assumed at approximately 13% (non-homeowner with Equifax score around 700). The household expenditure allowance reflects Australian HEM benchmarks for a single person with no dependants. Your actual result will vary based on your inputs.
Which calculator is right for you?
Just want a borrowing figure?
Use the Borrowing Capacity Calculator — enter your income, expenses, and debts to get a number in minutes.
Calculate my borrowing capacityWant to know if your application is likely to succeed?
Use the Approval Likelihood Calculator — it adds your credit score, bank statement behaviour, and employment type for a full picture.
Check my full approval likelihoodWhat reduces your borrowing capacity most
- Unused credit card limits — assessed at 3% of the limit per month, regardless of balance
- Dependants — each additional dependant adds a household expenditure allowance to your committed expenses
- Existing loan repayments — personal loans and car loans are counted at their actual monthly repayment amount
- High rent or mortgage — a large housing commitment directly reduces the residual available for loan repayments
Calculate your borrowing capacity
Common questions
Does my credit card balance or limit count?
Lenders assess your total credit card limit — not the balance you owe. A $10,000 limit is treated as $300 per month in committed expenses (3% of the limit), whether you use the card or not. Reducing or closing unused credit cards can meaningfully increase your borrowing capacity.
Do lenders use my gross or net income?
Lenders start with your gross annual income but convert it to a net monthly figure after applying an estimated tax calculation. For most incomes between $45,000 and $120,000, the effective rate after tax and Medicare is roughly 68–72% of gross. The calculator uses the actual Australian tax brackets for this estimate.
What is a DTI ratio and why does it matter?
DTI stands for debt-to-income ratio. It measures your existing monthly debt repayments as a percentage of your gross monthly income. A DTI above 50% typically moves an application into the Possible — lender dependent zone, because lenders see the borrower as over-committed relative to their income.
Does BNPL affect how much I can borrow?
Yes. Lenders include your monthly Buy Now Pay Later repayments in affordability calculations. BNPL does not appear on your Equifax credit file, but it does reduce your serviceability residual — the income left over after all commitments. If BNPL causes your residual to drop below zero, affordability fails regardless of your credit score.
What is the difference between the T2 and T3 calculators?
The T2 (Borrowing Capacity) calculator tells you how much you can borrow based on your income, expenses, and debts — it is a serviceability tool. The T3 (Approval Likelihood) calculator adds your credit score, bank statement behaviour, employment type, and defaults to produce a full approval likelihood classification. T2 gives you a number. T3 tells you the full picture.
Related guides
This is general information only and not financial advice. Results are indicative and may vary by lender.