Loan Affordability Calculator (DSR)
Check whether a proposed loan repayment is affordable by measuring it against a borrower's net income and existing obligations — the Debt Service Ratio (DSR). See the remaining income, the maximum repayment your DSR limit allows, and an estimated affordable loan amount.
How this is calculated
DSR expresses total debt repayments as a percentage of net income:
DSR = (existing + proposed) ÷ net income × 100
You evaluate the borrower against an editable Maximum DSR (default 40%). This is a default threshold, not a prescriptive rule — set it to your own institution’s approved affordability policy.
Show the affordable-repayment and loan-estimate formulas
max repayment = max(0, maxDSR% × income − existing)
The estimated affordable loan is the present value of that maximum repayment on a reducing-balance loan at the rate and term you enter: principal = payment × (1 − (1 + r)⁻ⁿ) ÷ r, where r is the monthly rate and n the number of months. Treat it as an estimate, not an offer.
What is DSR?
The Debt Service Ratio is one of the most widely used affordability tests in lending. It answers a simple question: after this loan, how much of the borrower’s income is committed to debt — and how much is left to live on? A normal borrower often understands the remaining income figure faster than the ratio itself.
Step-by-step calculation
A borrower earns TZS 1,500,000 net a month, already pays TZS 250,000 in existing obligations, and applies for a loan with a TZS 300,000 repayment.
total debt = 250,000 + 300,000 = 550,000 · DSR = 550,000 ÷ 1,500,000 × 100 = 36.7% · remaining = 950,000
At a 40% maximum DSR that is within the limit, leaving TZS 950,000 of income after all debt payments. Raise the proposed repayment and the DSR climbs toward — and past — the configured ceiling.
Why lenders check affordability
Lending beyond a borrower’s capacity to repay creates defaults, collections cost and real hardship. A disciplined affordability check keeps both the borrower and the portfolio healthy. Affordability assessment is an important part of responsible lending and may be required or guided by applicable regulatory and institutional policies.
FAQ
What is DSR?
The Debt Service Ratio is the share of a borrower's net monthly income taken up by debt repayments — existing obligations plus the proposed new loan. Lenders use it to judge whether a loan is affordable.
How is DSR calculated?
DSR = (existing debt obligations + proposed new repayment) ÷ net monthly income × 100. A lower percentage means more disposable income left after debts.
What DSR counts as affordable?
By default, this tool treats under 30% as affordable, 30–40% as caution, and 40% or more as unaffordable. These are default bands, not a universal rule — your institution's Compliance rule may differ, so confirm before relying on them.
Should I use gross or net income?
Use net (take-home) income — what actually reaches the borrower's account after tax and statutory deductions. Measuring debt against gross income understates the real burden and overstates affordability.
What counts as an existing debt obligation?
Every recurring debt repayment the borrower already services: other loan installments, salary-advance deductions, buy-now-pay-later, overdraft servicing and similar commitments. Everyday living costs are not debt obligations, though a full credit assessment considers them separately.
Can DSR go above 100%?
Yes — if obligations exceed income, DSR exceeds 100%. This tool never caps the figure, because a DSR over 100% is itself a meaningful (very negative) result, not an error.
Does a good DSR guarantee loan approval?
No. DSR is one affordability signal. Real underwriting also weighs income stability, credit history, collateral, the loan purpose and the lender's own policy. Treat this result as a first-pass check, not a decision.
Why do lenders check affordability?
To lend responsibly and sustainably: a repayment a borrower cannot realistically sustain leads to default, collections cost, and hardship. Affordability screening protects both the borrower and the loan book.
Turn affordability checks into part of your lending workflow.
A DSR check on a calculator is a start. Ustawi’s Compliance & Client Protection app helps you apply affordability discipline as you lend, and Core Lending carries it through origination, disbursement and servicing — so borrowers are assessed consistently and responsibly.
