Knowledge Base

Loan Affordability

Max Loan = Max EMI × [(1+r)^n − 1] / [r × (1+r)^n]

Banks typically allow EMI up to 40-50% of net monthly income (FOIR).

Your total EMI burden (all loans) should ideally be below 30% of take-home pay.

CIBIL score 750+ gets you the best interest rates. Below 650: loan may be rejected.

Consider future expenses (child education, medical) before maxing out your loan eligibility.

Joint loans with spouse can increase eligibility by 50-100%. Both get tax benefits too.

Pro Tip

Just because a bank approves a large loan doesn't mean you should take it. Keep total EMI below 30% of income for financial comfort.

Loan Affordability - Complete Guide

Everything you need to know about Loan Affordability and how to optimize your financial strategy.

Understanding the Formula

The core calculation is based on:

Max Loan = Max EMI × [(1+r)^n − 1] / [r × (1+r)^n]

Key Concepts & Rules

Banks typically allow EMI up to 40-50% of net monthly income (FOIR).

Your total EMI burden (all loans) should ideally be below 30% of take-home pay.

CIBIL score 750+ gets you the best interest rates. Below 650: loan may be rejected.

Consider future expenses (child education, medical) before maxing out your loan eligibility.

Joint loans with spouse can increase eligibility by 50-100%. Both get tax benefits too.

Expert Strategy

Just because a bank approves a large loan doesn't mean you should take it. Keep total EMI below 30% of income for financial comfort.

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