One of the biggest mistakes borrowers make is taking a loan without calculating whether they can actually afford the monthly payments. A simple affordability check prevents financial stress down the line.
Your total EMI obligations including the new loan should not exceed 30-35 percent of your monthly take-home income. If you earn 50,000 per month, total EMIs should stay under 15,000-17,500.
List all fixed monthly expenses: rent, utilities, insurance, existing EMIs, groceries, and transport. Subtract from your income. The remaining amount is what you have available for a new loan EMI plus savings.
Enter different loan amounts, interest rates, and tenures to see how various combinations affect your monthly payment. Experiment until you find an EMI that fits comfortably within your budget.
Consider upcoming expenses like planned purchases, possible rent increases, or family additions. Build a buffer so that your loan remains affordable even if circumstances change slightly.
Never commit 100 percent of your available income to EMIs and expenses. Keep at least 10-15 percent as a buffer for unexpected costs. Without this cushion, any surprise expense could trigger a default.
Calculating affordability takes 15 minutes but saves years of financial stress. Know your numbers before you borrow and you will never find yourself struggling to make payments.