How Much Can You Comfortably Afford to Repay Each Week?

When you are considering a loan, it is easy to focus on how much you could borrow. We think there is another question that matters just as much: how much loan repayment can I afford each week without putting pressure on the rest of my budget?

The answer is not simply whatever is left in your account before payday.

A manageable repayment should leave you enough money to cover essential living costs, existing debts, irregular expenses and a reasonable buffer for unexpected costs.

Working through your budget before you apply can help you decide whether borrowing is manageable, whether borrowing a smaller amount may be more appropriate or whether another option could suit your circumstances better.

How Much Loan Repayment Can I Afford?

You may be able to comfortably manage a weekly loan repayment when you can make it on time while continuing to cover expenses such as:

• Rent or mortgage payments.
• Groceries and household essentials.
• Electricity, gas, water, phone and internet.
• Transport and vehicle costs.
• Insurance.
• Medical and childcare expenses.
• Existing loans and other credit commitments.
• Irregular or annual bills.
• A reasonable allowance for unexpected costs.

The money left after these expenses is sometimes referred to as your available surplus.

However, we would not suggest automatically treating your entire surplus as money available for a loan repayment. Doing so could leave you with little or no flexibility when an unexpected bill arrives or your income changes temporarily.

A repayment that feels comfortable within your budget will generally be lower than the absolute maximum your calculations suggest you could pay.

A Simple Weekly Loan Affordability Formula

A useful starting point is:

Reliable weekly take-home income

minus essential living expenses

minus existing financial commitments

minus irregular expenses converted to a weekly amount

minus a realistic safety buffer

equals the amount potentially available for repayments

We suggest treating the result as an upper limit rather than a repayment target.

Leaving additional room in your budget may give you greater flexibility if your expenses increase during the loan term.

Moneysmart provides budgeting tools that can help you understand where your money is going. Its personal loan calculator can also help you estimate repayments, although calculator results are estimates and do not determine whether those repayments will be affordable for your individual circumstances.

Step 1: Work Out Your Reliable Weekly Income

Start with income you reasonably expect to continue receiving throughout the proposed loan term.

Use your take-home income after tax rather than your gross salary.

When your income changes from week to week, a cautious approach may be to base your budget on a lower or more typical earning week instead of your highest recent income.

Overtime, bonuses and occasional extra shifts may not be reliable enough to support a fixed repayment if you cannot reasonably expect them to continue.

To convert your income into a weekly amount:

• If you are paid fortnightly, divide your take-home pay by two.
• If you are paid monthly, multiply the monthly amount by 12 and divide the result by 52.

Step 2: Record Your Essential Expenses

Next, list the costs you need to meet before making a loan repayment.

Checking recent bank statements can make this easier because it may help you identify expenses you would otherwise overlook.

Include fixed costs such as rent as well as variable costs such as groceries, petrol and medical expenses.

Our guide to managing your budget can also help you organise your income, needs, wants and payment cycle.

Most importantly, use realistic figures.

Reducing essential expenses on paper simply to make a proposed repayment fit does not make the repayment more affordable in practice. Your budget should reflect what you genuinely need and normally spend.

Step 3: Include Your Existing Debts and Commitments

A new repayment does not replace the financial commitments you already have.

Make sure your budget includes commitments such as:

• Personal loans.
• Credit cards.
• Buy now, pay later arrangements.
• Car finance.
• Consumer leases.
• Child support.
• Payment plans.
• Other regular debt repayments.

You should be able to make a proposed new repayment without missing or delaying another financial obligation.

If you are considering borrowing primarily so that you can make repayments on another debt, take particular care. Repeatedly using new credit to meet existing credit commitments can make debt harder to manage.

When you are already having trouble with debts or essential expenses, contacting your existing provider about hardship assistance or speaking with a financial counsellor may be more appropriate than adding another repayment.

Step 4: Allow for Expenses That Do Not Happen Every Week

Some bills are easy to leave out of a weekly budget because they only arrive every few months or once a year.

These could include:

• Car registration and servicing.
• Insurance renewals.
• School expenses.
• Medical appointments.
• Council rates.
• Annual subscriptions.
• Clothing.
• Household repairs and replacement costs.

Try converting these costs into a weekly amount and including them in your budget.

For example:

Annual expense ÷ 52 = estimated weekly amount

If an annual insurance bill is $1,040, setting aside $20 each week would account for that expense in your weekly budget.

Leaving predictable but irregular expenses out can make your available income appear higher than it really is.

Step 5: Keep a Safety Buffer

We do not recommend assuming that every dollar left after your normal expenses should go towards a loan.

Consider leaving part of your surplus available for changes such as:

• A higher electricity bill.
• Increased grocery or fuel costs.
• A medical expense.
• Reduced working hours.
• An urgent household repair.
• An unexpected vehicle expense.

There is no single buffer amount that will suit everybody.

The amount you may need depends on factors such as:

• How stable your income is.
• How much your expenses vary.
• Whether other people rely on your income.
• Whether you already have emergency savings.
• How long the proposed loan will remain in place.

When a proposed repayment would consistently leave you with little or nothing after meeting your normal expenses, that may be a sign that the repayment is not comfortably affordable.

A Fictional Weekly Budget Example

Here is one fictional example of how someone could organise their figures.

This is not a recommended budget and does not represent a Sunshine Loans repayment quote or lending assessment.

This example leaves $160 after the listed costs and buffer.

That does not mean the person should automatically commit the full $160 to a repayment. Doing so would remove any additional flexibility beyond the buffer already included.

They could decide that:

• A smaller repayment is more manageable.
• They should reduce the amount they plan to borrow.
• They should delay borrowing until there is more room in their budget.
• A non-credit alternative may be more appropriate.

What is appropriate depends on your actual income, expenses, commitments and circumstances.

Stress-Test Your Repayment Before Applying

Before deciding that a repayment fits your budget, try testing your numbers against a less favourable week.

Ask yourself:

• Could I still make the repayment if I earned less than usual?
• Could I make it after an unexpectedly high household bill?
• Would I still have enough for housing, groceries, transport and medical needs?
• Does the repayment depend on receiving overtime?
• Would I need to use another form of credit?
• Could I realistically continue making the repayment for the full loan term?

Another practical exercise is to put the proposed repayment amount aside for one or two pay cycles before borrowing.

This can give you a clearer idea of how that amount affects your everyday budget. It cannot guarantee that future repayments will be affordable, but it may help you test your assumptions.

How the Loan Term Affects Weekly Repayments

How much you borrow is only one part of your repayment calculation.

Your scheduled repayments can also be affected by:

• The loan term.
• The interest rate.
• Establishment and other applicable fees.
• Your repayment frequency.
• The way repayments are calculated.
• Any applicable charges if you miss a payment.

A longer loan term can result in smaller scheduled repayments than a shorter term, depending on the product, but it can also increase the total amount you pay.

A shorter term generally means the amount needs to be repaid over fewer payments, which can make each repayment higher.

We recommend looking at both the individual repayment amount and the total amount repayable before deciding whether a credit product suits your budget.

Our Sunshine Loans Repayment and Product Information

We offer unsecured Medium Amount Credit Contracts to eligible applicants.

Our current product features include:

Our loans are unsecured, which means we do not require security over your property or another asset.

Every application is subject to our eligibility requirements, individual assessment and approval.

You can review our loan costs and fees before deciding whether our product may be appropriate for your circumstances.

Our Basic Eligibility Requirements

To meet our current basic eligibility criteria, you generally need to:

• Be at least 18 years old.
• Receive at least $750 per week or $1,500 per fortnight in take-home income.
• Receive income from legal and verifiable sources.
• Have your income visible and verifiable through your bank statements.
• Receive income from a source other than government benefits alone.
• Be able to make the proposed repayments without experiencing financial hardship.
• Use the loan for a personal rather than business purpose.

Your income can include a combination of employment income and government benefits, but government benefits cannot be your only source of income.

Meeting these basic criteria does not guarantee that we will approve your application.

We assess applications individually and consider your financial circumstances, requirements and objectives. We also assess whether the proposed credit contract would be unsuitable for you.

You can review our complete loan eligibility requirements before applying.

When a Repayment May Not Be Affordable

There are several signs that a proposed repayment deserves another look.

For example:

• You would have to reduce essential spending to make the repayment.
• You would have no money available for unexpected costs.
• Your budget depends on overtime or irregular income.
• You are already behind on bills or existing debts.
• You would need another form of credit between repayments.
• One missed shift or unexpected expense would cause you to miss a payment.
• You are borrowing to cover ordinary weekly expenses that your regular income cannot meet.

Our Medium Amount Credit Contract is intended for eligible consumers who may need to:

• Meet an infrequent or sometimes unforeseeable personal expense.
• Purchase certain major personal property.
• Meet certain one-off discretionary expenses.

Our product is not intended to replace your regular income or routinely fund ordinary, ongoing household expenses. It is also for personal, non-business purposes.

Most importantly, we must assess whether the proposed credit contract would be unsuitable before we can offer you a loan.

Alternatives to Consider Before Borrowing

A loan is not necessarily the right solution for every expense.

Before committing to repayments, you may want to consider whether you could:

• Use available savings.
• Delay or reduce the expense.
• Ask the service provider for a payment plan.
• Contact a utility company, insurer or existing lender about hardship assistance.
• Review your budget for temporary savings.
• Compare other suitable credit products and their total costs.
• Investigate whether you qualify for a No Interest Loan or another lower-cost option.
• Speak with a free financial counsellor.

Not every alternative will work in every situation, but checking your options before borrowing can help you avoid taking on a repayment that does not fit comfortably within your budget.

If you are struggling to pay existing debts or essential living costs, you can contact the National Debt Helpline on 1800 007 007 for free, confidential and independent financial counselling.

If you already have a loan with us and are experiencing difficulty making a repayment, contact us as early as possible.

Our contact information includes a dedicated number for customers experiencing financial hardship or wishing to make a complaint.

Frequently Asked Questions

What Percentage of My Income Should Go Towards a Loan Repayment?

There is no single percentage that tells you whether a loan repayment is affordable.

Your:

• Housing costs.
• Dependants.
• Existing debts.
• Essential expenses.
• Income stability.
• Financial buffer.

can all make a significant difference.

We recommend looking at your actual budget rather than relying on an arbitrary percentage of income.

Is the Amount I Am Offered the Same as the Amount I Can Afford?

Not necessarily.

Any amount we may offer is subject to an assessment of your application, but you should also consider your own spending patterns, upcoming expenses and the amount of flexibility you prefer to keep in your budget.

You do not have to borrow the maximum amount that may be available to you.

Should I Calculate Affordability Weekly or Fortnightly?

Using the same frequency as your pay cycle and proposed repayments can make your budget easier to understand.

For example, if repayments are weekly but you receive your income fortnightly, make sure enough of each pay is allocated to cover both weekly repayments as well as your other expenses.

Can I Afford a Loan if My Income Changes Every Week?

Variable income can make fixed repayments harder to budget for.

We suggest using a cautious and sustainable income estimate instead of basing your decision on your highest-earning week.

When you apply with us, we also assess your financial information to determine whether the proposed credit contract would be unsuitable.

What Happens if I Cannot Make a Repayment?

Contact your credit provider as early as possible if you think you may have trouble making a scheduled repayment.

If you have a loan with us, a $35 failed-payment default fee may apply if you fail to make a scheduled repayment.

If you are experiencing financial difficulty, contact us so that we can discuss your circumstances and the assistance that may be available. The exact arrangement you request is not guaranteed.

Does Meeting Our Minimum Income Requirement Guarantee Approval?

No.

Our minimum income requirement is only one part of our eligibility and assessment process.

We consider your financial circumstances, requirements and objectives, and assess whether the proposed credit contract would be unsuitable.

Every application is individually assessed, and approval is not guaranteed.

Check the Repayment Against Your Real Budget

The most important question is not simply how much you could potentially borrow.

It is whether you can make each scheduled repayment while continuing to meet your:

• Essential expenses.
• Existing commitments.
• Irregular bills.
• Reasonable unexpected costs.

Before you proceed, review your income, normal spending, existing debts, irregular bills and financial buffer.

You can then review our current loan costs and eligibility requirements to better understand our product and consider whether it may be appropriate for your circumstances.

If you believe our loan may be suitable for your situation, review our eligibility requirements and full costs before applying.

Applications are subject to eligibility, responsible lending assessment and approval. Borrow only what you need and can reasonably afford to repay.

The information provided in this blog is for general informational purposes only and does not constitute financial or legal advice. It is not tailored to the specific circumstances of any individual. Before acting on the information, you should consider whether it is appropriate for you, having regard to your objectives, financial situation and needs.