Understanding your loan eligibility is crucial before applying for a personal, home, or car loan. Lenders in India calculate eligibility based on your income, expenses, credit score, and existing debts. Here’s a step-by-step guide to help you know how much you can borrow.
Step 1: Assess Your Income
Net Monthly Income: Lenders consider your take-home salary after deductions.
Other Income: Include bonuses, rental income, or business income if applicable.
Impact: Higher monthly income increases your eligible loan amount.
Step 2: Evaluate Existing Liabilities
Ongoing Loans: Include home loans, personal loans, car loans, and credit card dues.
Debt-to-Income Ratio: Lenders generally prefer a DTI below 40–50%.
Impact: Lower liabilities increase your loan eligibility.
Step 3: Consider Loan Tenure
Tenure Options: Longer tenure reduces EMI burden but may increase interest costs.
Impact on Eligibility: Longer repayment periods allow lenders to offer higher loan amounts while keeping EMIs manageable.
Step 4: Check Credit Score
Credit Score Range: 750+ is considered excellent.
Impact: Higher credit scores boost approval chances and may qualify you for better loan amounts.
Step 5: Calculate EMI Affordability
EMI Calculation: Banks calculate loan eligibility based on how much EMI you can comfortably pay monthly.
Rule of Thumb: Lenders usually allow EMI not exceeding 40–50% of your monthly income.
Step 6: Use Bank/Loan Eligibility Calculators
Most banks provide online eligibility calculators where you can input your income, tenure, and existing debts to estimate your loan amount instantly.
FAQs
Q1. What is loan eligibility?
It’s the maximum loan amount a lender is willing to sanction based on your income, liabilities, and credit history.
Q2. Can loan eligibility be increased?
Yes, by improving your income, reducing existing debt, and maintaining a good credit score.
Q3. Does tenure affect eligibility?
Yes, longer tenure can increase eligibility while reducing monthly EMIs.
Q4. Are all types of loans calculated the same way?
While the principles are similar, secured loans (home/car) generally offer higher eligibility than unsecured loans.
Published on : 3rd September
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share