Your borrowing capacity is the amount of money you are able to borrow from a lender. The basic formula for calculating borrowing capacity is: Good to know Borrowing capacity = income - fixed expenses This is, however, a simplification. Lenders will base the amount that they will lend you on criteria including: Your debt ratio The type of loan (fixed or variable rate) The amount of the monthly payments The duration of the loan What banks look at when evaluating borrowing capacity: Sources of income: Salaries and wages Retirement pensions Rental properties income Dividends and investment income Etc Expenses considered: Existing loan payments (automobile loans, home loans, personal loans, etc.) Rent Alimony payments Etc This list is not exhaustive. Different lenders take into account different criteria. One lender may offer you a higher loan than another. The debt ratio Calculate your debt ratio by dividing your existing debt by your overall income. Multiply that percentage by 100 to get your debt ratio. Good to know Debt ratio = (existing debt * income) * 100 While every lender is different, most will look for a debt ratio under 33%. Depending on the lender and your situation, you may be denied a personal loan under this ratio. Someone else might be approved while being above it.