On ₹1,00,000 a month with ₹10,000 of EMIs, you can borrow about ₹34,56,925 over 20 years at 8.5%. That is a ₹30,000 monthly EMI, from a 40% limit on loan payments.
What this calculates
Enter your monthly income, the EMIs you already pay, the share of income that may go on loan payments, the interest rate, the term and any down payment. This works out the monthly payment you can add, the biggest loan that payment repays, the price it supports with your down payment, and the interest over the term. It is the EMI calculator worked backwards.
The formula
Budget
budget = income × share of income for loan paymentsAffordable EMI
EMI = budget − the EMIs you already payLoan
loan = EMI × (1 − (1 + r)^−n) ÷ rHere r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of months. At a zero rate the loan is simply EMI × n. The price you can afford is the loan plus your down payment.
Worked example
When to use it, and the mistakes to avoid
Use it before you look at homes or cars, to set a budget, or to see how a lower rate, a longer term or paying off another loan changes what you can borrow.
The mistakes that cost the most:
- Forgetting existing EMIs. They come out of the same budget.
- Stretching the term to borrow more. The monthly payment is the same but the interest is far bigger.
- Assuming the limit is fixed. The share of income lenders allow varies; check yours.
- Ignoring other costs. Insurance, tax, maintenance and fees come on top of the payment.
- Borrowing the maximum. The most you can borrow is not the most that is comfortable.
FAQ
How much loan can I afford?
Work out the share of your income you can put on loan payments, take off the EMIs you already pay, and see what loan that monthly amount repays over your term. On ₹1,00,000 a month with ₹10,000 of EMIs, 40% leaves ₹30,000, which repays about ₹34.57 lakh over 20 years at 8.5%.
What share of income should go on loan payments?
Lenders differ. Many cap total loan payments at about 40% to 50% of income, and US mortgage lenders often look at 36% to 43% of gross income including the new home loan. It is an assumption you can change, not a rule built in here, so use your lender's figure if you know it.
Why does a longer term raise the loan I can afford?
A longer term spreads the same monthly payment over more months, so it repays a bigger loan. But more of it is interest. At 8.5% a ₹30,000 payment repays about ₹34.57 lakh over 20 years and about ₹39 lakh over 30, while the total repaid rises by far more.
Does the down payment change the loan?
No. The loan is set by what you can pay each month. The down payment is added on top to show the price you can afford: a ₹34.57 lakh loan with a ₹5 lakh down payment supports a price of about ₹39.57 lakh.
Is this what a lender will actually offer?
No. A lender also looks at your credit record, job history, other debts and the value of what you are buying, and may use a different income figure and rate. Use it as a guide to what is comfortable, then ask for a quote.