Loan Repayment from Salary
Clearly see how a personal loan will impact your budget. This calculator shows the effect of loan repayments on your weekly, fortnightly, or monthly take-home pay.
Quick Use Samples
Your Details
Loan Impact Analysis
Debt-Free Date
November 2030
Fortnightly Pay Breakdown
Your estimated monthly loan repayment will be $587. After this repayment, your estimated take-home pay will be $2,021.70 per fortnightly. This loan will take up 11.8% of your net income. Over the life of the loan, you will pay $5,219 in interest.
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What is a Loan Repayment?
A loan repayment is a regular payment made to a lender to pay back borrowed money. This calculator helps you determine how much of your salary you can comfortably allocate to loan repayments, whether for a personal loan, car loan, or student debt, without causing financial stress.
Behind the Formula
The calculator uses the 'debt-to-income' ratio, a key metric used by Australian lenders. It calculates what percentage of your gross income will be used for loan repayments. A common guideline is to keep total debt repayments below 36% of your pre-tax income. The tool helps you find a sustainable repayment amount that fits within this guideline.
Expert Insights
- Lenders in Australia look closely at your debt-to-income ratio and your living expenses when assessing a loan application. Showing that you can comfortably afford repayments from your salary is crucial for approval.
- Making extra repayments on your loan, especially in the early years, can save you thousands of dollars in interest over the life of the loan. Even small extra amounts can make a big difference.
- Be aware of the loan term. A longer loan term means lower monthly repayments, but you will pay significantly more in total interest. A shorter term is more expensive month-to-month but cheaper overall.
Actionable Tips
- Use this calculator before taking out a loan to ensure the repayments are sustainable. Don't stretch your budget too thin.
- Set up an automatic fortnightly or weekly repayment schedule that aligns with your payday. This makes it easier to manage and can save you interest compared to monthly payments.
- Try to allocate at least half of any pay rise or bonus towards making extra loan repayments to pay off your debt faster.
Real-World Examples
A Car Loan
Someone earning $80,000 a year wants to buy a new car. The calculator shows that a $30,000 car loan over 5 years will have repayments of around $600 a month, which is a manageable 9% of their gross income.
Consolidating Credit Card Debt
A person with $15,000 in credit card debt takes out a personal loan to consolidate it. The loan has a fixed repayment schedule, helping them pay it off systematically rather than just making minimum payments on the card.
The Danger of Over-committing
Someone takes out a large personal loan that pushes their debt-to-income ratio to 45%. When interest rates rise, their repayments increase, causing significant financial stress and forcing them to cut back on essential spending.
Glossary of Terms
Debt-to-Income Ratio (DTI)
The percentage of your gross monthly income that goes to paying your monthly debt payments. Lenders use it to measure your ability to manage repayments.
Loan Term
The period of time over which a loan is scheduled to be repaid.
Interest Rate
The percentage of the loan amount that a lender charges for borrowing money.