How to Calculate How Much You Can Borrow with Excel: A Step-by-Step Guide

Calculating how much you can borrow using Excel is a straightforward task. Essentially, you’ll use the tool to lay out your financial situation clearly, taking into account your income, expenses, and the potential loan interest rate. Excel will then help you work out the maximum amount you can borrow without putting yourself under financial strain.

After you’ve completed this process, you’ll have a clear idea of a realistic loan amount that you can comfortably afford to repay. This helps prevent overborrowing and ensures you’re making a financially responsible decision.


For many individuals, taking out a loan is an essential step towards achieving personal goals, whether it’s buying a home, a car, or investing in education. However, the key to borrowing wisely lies in understanding just how much you can afford to borrow. This is where Excel comes in handy. Excel, a powerful spreadsheet application, can be an excellent tool for financial planning, particularly when it comes to calculating potential loan amounts.

With Excel, you can input various financial factors such as your monthly income, expenses, and the interest rate of the desired loan to determine the maximum amount you can borrow. By doing this, you can ensure that you don’t overextend your finances and fall into a debt trap. This process is relevant for individuals who are considering taking out a loan and want to make informed and responsible financial decisions.

Step by Step Tutorial: Calculating Loan Amounts Using Excel

Before we dive into the steps, understand that this tutorial will guide you through using Excel to calculate a loan amount that fits your financial situation. By inputting your income, expenses, and other crucial details, Excel’s calculation functions will help you arrive at a safe borrowing limit.

Step 1: Open a new Excel spreadsheet

Create a new Excel workbook to get started.

In opening a new spreadsheet, you have a clean slate to organize your financial information. Ensure you save the document with a suitable name so you can easily find it later.

Step 2: List your monthly income and expenses

Input all sources of income and monthly expenses into the spreadsheet.

This step is crucial as it gives you a clear picture of your net income after expenses. Be as thorough as possible in listing all your expenses to ensure accuracy in the calculation.

Step 3: Determine the interest rate and loan term

Find out the interest rate for the loan you’re interested in and decide on the loan term.

Interest rate significantly affects the total amount you’ll pay back, and the loan term determines how long you’ll be making payments. These figures are essential for calculating the monthly loan payment that you can afford.

Step 4: Use the PMT function to calculate the monthly payment

Utilize Excel’s PMT function to compute the monthly payment based on the interest rate and loan term.

The PMT function is a financial function that calculates the payment for a loan based on constant payments and a constant interest rate. Familiarize yourself with how it works to use it effectively.

Step 5: Analyze the results and adjust if necessary

Examine the output to determine if the monthly payment is within your budget. Adjust the loan amount accordingly if it’s not.

If the calculated loan payment is too high, it could strain your budget. Consider reducing the loan amount or extending the loan term to lower the monthly payment.


Informed borrowing decisionUsing Excel to calculate your borrowing limit helps prevent overborrowing, ensuring you make an informed decision.
Clear financial overviewLaying out your income and expenses in Excel provides a clear view of your financial health.
Customizable calculationsExcel allows you to customize calculations based on different scenarios, interest rates, and loan terms.


Requires Excel knowledgeTo perform these calculations, some basic understanding of Excel is necessary.
Manual data entryYou must manually enter all financial data, which can be time-consuming and error-prone.
Doesn’t account for future changesCalculations are based on current financial situations and don’t account for potential future income or expense changes.

Additional Information

When using Excel to calculate how much you can borrow, it’s essential to include a buffer in your budget for unexpected expenses or financial emergencies. Also, remember that lenders may have their own borrowing criteria, so the amount Excel calculates is just a guideline. It’s always wise to speak with a financial advisor or lending professional to get a more accurate picture of your borrowing capacity.

Another tip is to regularly update the spreadsheet with any changes in your income or expenses. This ensures that the calculated borrowing amount remains accurate over time. Additionally, explore Excel’s other financial functions, like the IPMT and PPMT functions, which can provide insights into interest and principal payments over the loan term.


  1. Open a new Excel spreadsheet.
  2. List your monthly income and expenses.
  3. Determine the interest rate and loan term.
  4. Use the PMT function to calculate the monthly payment.
  5. Analyze the results and adjust if necessary.

Frequently Asked Questions

What is the PMT function?

The PMT function is an Excel financial function that calculates the payment for a loan based on constant payments and a constant interest rate.

Can I calculate a loan for a variable interest rate?

Excel’s PMT function works best with fixed interest rates. Variable rates require a more complex calculation and may not be as straightforward.

How often should I update my financial data in the spreadsheet?

It’s best to update your financial data whenever there’s a significant change in your income or expenses to maintain accurate calculations.

Do lenders use the same method to calculate how much I can borrow?

Lenders may use similar methods but also consider other factors like credit score and employment history. Use Excel’s calculations as a guideline, not a guarantee.

Can I use Excel to calculate other types of loans, like a mortgage?

Yes, Excel can be used to calculate various types of loans, including mortgages, by adjusting the interest rate and loan term accordingly.


Using Excel to calculate how much you can borrow is a smart way to approach lending. It equips you with a clear understanding of your financial capabilities and helps prevent overborrowing. While Excel can be a powerful tool, it’s important to remember it’s just one part of a comprehensive financial planning process.

Always consider seeking advice from financial professionals to validate your findings. Remember, when it comes to borrowing, knowledge is power, and Excel is a valuable ally in your financial journey.

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