Loan Eligibility & Amount
Most of us do not understand how the amount
for the loan to be given is decided. Sometimes, we find that
two people working in the same firm with the same salary end
up getting drastically different amounts as loans. How is
this possible?
The loan eligibility is based on two different calculations
- The amount of loan repayment that you can afford to make every month.
- A percentage of the cost of the property.
Let us look at the first calculation: Repayment Ability
The ability to repay is based on your total
income and expenditure. Let us say that you have a monthly
income of Rs.20,000, and your monthly expenses are Rs.12,000
then you can pay Rs. 8000 towards any loan you take. This
figure is then reverse calculated over the tenure of the loan
to arrive at the Eligibility Amount. Obviously, the larger
your repayment capacity, the higher will be your loan eligibility.
Is it that simple?
No. But that is the basis. Other factors
can also affect the repayment capacity. For eg, if you are
able to save Rs.2000 per month on the rent to be paid because you
will now be owning your house, then your repayment capacity
will become (Rs. 8000 PLUS Rs 2000), effectively increasing
the amount you can obtain as loan. Also, for the same income,
the eligibility for a loan is higher for longer tenure loans,
since the repayment is spread over a longer period for the
same amount.
What is considered as income?
Some basic thumb rules for arriving at the Income of the borrower, are given below. Usually the following
will not be considered as a category of income
- Medical Reimbursements, performance bonus, or LTA, since
they are not available at consistent periods, or in consistent
amounts.
- Interest income, unless it can be proven that the source
is a regular source of income.
- Overtime, for similar reasons.
- Any earnings from non-verifiable sources like expense
vouchers, rental incomes etc, unless documentary proof of
the source being consistent and stable is provided.
For self employed professionals, some of the documents vary,
and measurements are somewhat different.
In case of a joint ownership of the property, the incomes
of both applicant, and co-applicants can be clubbed together
for ascertaining repayment capacity.
Existing Loans
If you have any existing loans, they will
affect your repayment capacity, since your disposable income
(Rs.8000 in the example above) will be reduced by the EMI
on the existing loan. Mostly, however, short term loans of
6 months or so are not taken into consideration
Tenure
While you have understood how the loan eligibility
amount can be increased by taking a longer tenure, it is important
to understand the limitations of this route.
The maximum tenure of the loan available
is based on your age at the time of application. The age should
not exceed 58 years / 60 years (as retirement may be defined
at your firm) for salaried employees and not exceed 65 years
for self employed professionals.
Keeping this in mind, taking the maximum
possible tenure will ensure the maximum amount eligibility.
We have a EMI Calculator
tool, which will help you get an approximate figure for your
monthly repayment options.
For an exact amount, please give us a call,
or drop in to meet us, and we will be glad to work out the
details for you.
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