Borrowing Capacity Calculator

Formula

The formula to calculate the Borrowing Capacity (BC) is:

\[ BC = NI - E \]

Where:

$ BC $ is the Borrowing Capacity ($)
$ NI $ is the monthly net income ($)
$ E $ is the monthly expenses ($)

What is Borrowing Capacity?

Borrowing Capacity refers to the amount of money an individual can borrow based on their monthly net income and monthly expenses. It represents the remaining income after all expenses are deducted, which can be used to repay borrowed funds. Understanding one's borrowing capacity is crucial for making informed financial decisions and avoiding excessive debt.

Example Calculation

Let's assume the following values:

Monthly Net Income (NI) = $5,000
Monthly Expenses (E) = $2,500

Using the formula to calculate the Borrowing Capacity (BC):

\[ BC = 5,000 - 2,500 = 2,500 \]

The Borrowing Capacity is $2,500.