How is loan eligibility calculated?

Based on your income, different banks consider different percentages that you can set aside for paying EMIs. This percentage depends on parameters like your occupation and number of dependents. Your EMI is then calculated based on inputs like:


1. Interest rate of the bank

2. Time period for which you want the loan

3. Loan amount required by you


The calculator then lets you know how much loan you are eligible for. Generally Medical allowance and LTA are not considered as part of income as banks consider them as reimbursements. Banks also consider the borrower's credit history and CIBIL score before sanctioning the loan.

The higher your ability to pay back the loan, higher would be the amount that you would be eligible for. Similarly, the loan amount is higher for bigger tenures and lower interest rates.

There are other ways to increase your loan amount like clubbing your income. You can jointly apply for a loan along with a spouse or any other earning member of the family to increase your loan eligibility.


How is EMI calculated?

EMI are used to pay off both interest & principal each month. It is calculated on the following parameters:


1. Amount of loan

2. The time period for which the loan is taken (Tenure of loan)

3. Rate of interest


EMIs can be reduced by increasing the time period, but this will come at a cost of more interest to the bank and liability for a larger duration.