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Loan Alert: Check Your EMI Limit Before Taking More Debt
M
Moneycontrol•20-09-2026, 11:20
Loan Alert: Check Your EMI Limit Before Taking More Debt
- •Before taking a new loan, assess your total EMI-to-income ratio, not just the new EMI in isolation.
- •TransUnion CIBIL suggests keeping total EMIs and credit dues below 30% of monthly income for financial health.
- •Lenders often scrutinize loan applications when total EMIs approach or exceed 50% of income, reducing approval chances.
- •Calculate your EMI-to-income ratio using your take-home salary and all existing fixed loan repayments, including credit card balances.
- •Consider all household expenses beyond EMIs; a low EMI doesn't guarantee affordability if other costs consume most of your remaining income.
Key Questions Answered
TransUnion CIBIL suggests keeping total EMIs and credit dues below 30 percent of monthly income as a healthy target for borrowers, while noting that loan approval chances decrease when total EMIs cross 50 percent.
Borrowers should start with their net take-home monthly income that actually reaches their bank account, add all existing loan repayments like home and car loans along with credit card balances, and then factor in the new proposed EMI.
Lenders can lower monthly installments by stretching loan repayment terms, which actually increases total interest costs. Additionally, after paying EMIs, high fixed expenses like rent, school fees, and insurance can leave very little breathing room in the budget.
