Loan Information

How Much Can I Borrow?

No matter what you're borrowing for, or the type of loan you choose, you are probably wondering how much you can borrow. Using a two-step approach, you can first determine a maximum monthly debt payment and then, using repayment factors, approximate the maximum amount you can borrow.

Your debt-to-income ratio is an important factor that is taken into consideration when determining your ability to repay a loan. Your debt-to-income ratio can be defined as the percent of your gross monthly income applied to paying your outstanding monthly debt, including rent or mortgage payments. Dollar Bank's guidelines generally limit the debt-to-income ratio to 38%. To get an idea as to how much you may have available for a loan or line of credit payment, follow the example below.

Example
Gross monthly income$2,500$________
38% debt-to-income ratio x .38 x .38
Maximum monthly debt payment$950$________
Current monthly debt payments- $825$________
Available monthly payment$125$________
Debt consolidated or repaid*+ $75$________
Total cash available$200$________
* If, for instance, you are paying off your current auto loan to take out a new auto loan, or if you are consolidating a number of debts with a new loan, you may add those payments back to become available cash. Otherwise enter $0 on this line.

In our example, up to $200 is available for a monthly loan payment. Have you calculated what your maximum monthly payment might be?

Now that you have a maximum monthly payment, you can approximate the largest loan amount you can finance with "repayment factors." A Dollar Bank Representative can give you the correct repayment factors for the loan that appeals to you.

Let's determine the maximum line of credit amount available from the previous example. Assuming a repayment factor of 2%, simply divide the cash flow available by the repayment factor.

Example
Total cash available$200$_______
Repayment factor* ÷ .02 _______
Maximum line of credit$10,000$_______

Now, let's determine the maximum loan amount available. Repayment factors vary with term and interest rate; they are the same regardless of the amount financed. Let's assume that the rate and term available to you today to buy a new auto resulted in a calculated repayment factor of .197. Using the example, let's determine the maximum loan amount.

Example
Total cash available$200$_______
Repayment factor* ÷ .0197 _______
Maximum line of credit$10,152$_______

A Dollar Bank Representative can help you calculate additional repayment factors. In addition, a representative can help you determine how much you may be able to borrow. Of course, other factors are taken into account when making a loan decision, such as credit history and employment.

At Dollar Bank, we want to work with you to create a loan that is suited to your budget needs. Speak to any of our Representatives now. They will be happy to help you.

To try our loan calculators, click here.


The information presented in this publication is general in nature; it is not our intention to provide specific advice to individuals or a comprehensive discussion of the subject matter. We suggest that you consult with your financial or tax advisor, accountant or attorney to obtain specific advice or comprehensive information.
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