How Much to Borrow: A 7-Line Worksheet That Covers the Fee and Tests the Payment

Ask a lender for exactly the $1,270 you need, and if it takes a hypothetical 8% origination fee out first, $1,168.40 lands in your account. You’re $101.60 short of the repair bill, and you still owe the full $1,270.

The opposite mistake costs more. Rounding up “to be safe” means paying interest on money you never needed, and at high APRs that interest can outgrow the extra you borrowed. The number you want sits in between: the smallest loan that actually covers the need. Below is a seven-line worksheet that finds it. We’ll fill it in beside Theo (a composite), whose car broke down the same week his electric bill came due.

Seven lines, two answers

Copy the lines onto paper or into your phone’s notes and leave the “You” column blank for now. Theo’s column shows how each line gets filled. His figures are illustrative.

Find-your-number worksheetLines 4 and 6 are the answers

1. 1

   Line 1: What the money must cover

   Every cost, copied from a bill, quote or invoice

   You Theo  $1,670

2. 2

   Line 2: Cash you can put in

   Only what leaves next week’s essentials covered

   You Theo  $200

3. 3

   Line 3: Amounts you can spread out or delay

   Payment arrangements you’ve asked for

   You Theo  $200

4. 4

   Line 4: Net need

   Line 1 minus Lines 2 and 3

   You Theo  $1,270

5. 5

   Line 5: Fee rate, if it’s taken out of the loan

   From the offer or the Truth in Lending disclosure

   You Theo  8%

6. 6

   Line 6: Request

   Line 4 ÷ (1 − Line 5), rounded up to the lender’s increment

   You Theo  $1,400 ($1,380.43 before rounding)

7. 7

   Line 7: Payment room

   Slow-month take-home minus essentials minus your cushion

   You Theo  $160 ($2,250 − $1,990 − $100)

Theo’s check: a $1,400, 12-month loan at a hypothetical 36% costs $140.65 a month, inside his $160 of room.

Lines 4 and 6 are the answers: what you need in hand, and what to ask for. Line 7 tells you if you can carry it. Here’s how to fill each one honestly.

Line 1: Price it from paper, not from memory

Write each cost from a document: a quote, an invoice, a past-due notice. Memory rounds up when you’re anxious and down when you’re hopeful, and neither helps. Theo’s list was a $1,240 repair quote, a $310 past-due electric bill and $120 for rides to work while the car sat in the shop. Line 1: $1,670.

If a cost has no paper yet, get the paper. A repair shop will usually write a quote; a vague “about a thousand” from the counter is how loans end up $300 short.

Lines 2 and 3: Shrink it before you borrow it

Line 2 is cash you can put in without missing next week’s groceries or rent. Theo can spare $200 from his paycheck. Don’t empty the account to make the loan smaller; a smaller loan with no cash cushion just moves the emergency to next week.

Line 3 is where most people leave money on the table. Many utilities, medical offices and repair shops will set up a payment arrangement if you ask before the bill goes further past due, though terms vary. Theo called the utility and used these words:

That took $200 off the loan, and an arrangement like that usually costs nothing extra, which no loan can say. Theo’s Line 4, the net need, is $1,670 minus $200 minus $200: $1,270. If you have bills you haven’t asked about yet, the borrowing alternatives tool lists options worth a call first.

Lines 5 and 6: Borrow to net, not to need

Many lenders deduct an origination fee before depositing the loan, and you repay the full loan amount anyway. To end up with Line 4 in your account, divide by what’s left after the fee:

• Ask for $1,270$1,168.40 arrives after a $101.60 fee: $101.60 short
• Ask for $1,400$1,288 arrives after a $112 fee: covered, $18 to spare

• Deposited
• Fee (8%)
• Net need, $1,270

Two checks before you sign. First, find the “Amount Financed” on the Truth in Lending disclosure, which is roughly what will be deposited. It should be at least your Line 4. Second, compare the rate with the APR. On Theo’s loan, a hypothetical 36% rate plus the 8% fee works out to an estimated APR of about 53% over 12 months, because the fee is part of the cost. If the fee is added to the balance instead of deducted, skip the gross-up, but expect to pay interest on the fee. Our guide to origination fees covers both versions.

Line 7: Test the payment against your worst month

If your hours, tips or gig income swing, an average month will flatter the payment. Use the take-home pay from your lowest recent month. Theo’s slow month is $2,250. His essentials (rent, utilities, phone, insurance, gas, groceries and minimum payments) come to $1,990, leaving $260. He wants at least $100 left for surprises, so Line 7 gives him $160 of room for a payment. Pick the cushion you’d really need; $100 is Theo’s choice, not a rule.

Then read your result like this:

• If the payment fits with your cushion intact, take the shortest term that passes.
• If it doesn’t fit, go back to Line 3 and cut the amount before you stretch the term.
• If only a longer term fits, take it knowing the extra interest, and pay ahead when you can if there’s no prepayment penalty.
• If nothing fits at the APR you’re offered, the loan is too expensive for your month, whatever the approval says.

The affordability explorer runs this test with your own income and bills.

“A little extra, just in case” has a price tag

Borrowing a cushion feels free on the day the money arrives. Here is what each additional $100 costs in interest alone, before any fee.

At 99% over 24 months, each extra $100 costs more in interest than the $100 itself. That’s not a cushion; that’s a second bill. In Theo’s case, taking $2,000 instead of $1,400 for 12 months would cost $171.35 more at 36% with the 8% fee (including $48 of extra fee, since 8% of the added $600 comes off the top), or $367.81 more in interest at 99%. Our guide to small-loan costs by APR runs these numbers for $1,000 to $5,000.

When the offer doesn’t match Line 6

• Approved for more than Line 6. An approval is a ceiling, not a target. Say: “I’d like to borrow $1,400, not the full amount. Please send updated disclosures for that amount.” Then check the new Amount Financed and payment.
• Approved for less than Line 6. Don’t take a loan that can’t finish the job. Half a repair leaves you with a payment and a car that still doesn’t run. Close the gap first (Line 3 again) or look elsewhere.
• The lender’s minimum is above your number. Some lenders won’t lend below a set amount. You could repay the extra right away, but a deducted fee on that extra isn’t refunded, and you’ll still pay some interest. A smaller source may cost less.
• The rate goes up after a full application. Rerun Line 7 at the new APR. A payment that passed at one rate can fail at another.

Before you sign, hold the disclosure next to your worksheet. The Amount Financed should be at least Line 4. The payment should fit inside Line 7. Note the “Total of Payments”, the full amount you’ll repay, and check if paying early carries a penalty. If any of those don’t line up, we’d stop there and ask why.

Theo signed for $1,400 over 12 months. $1,288 arrived, and the repair and the first $110 to the utility were both covered. If you’re working out timing as well as size, our guide to when loan money arrives explains why a Friday approval often isn’t spendable until the following week.

So, look at your own Line 4. Is every dollar on it backed by a bill or a quote, or is some of it the “just in case” money you’d be paying interest on for a year?