How Do Banks Determine Loan Eligibility?
When you apply for a loan, the bank’s primary concern is your repayment capacity. They determine your Loan Eligibility by evaluating your net monthly income, your age (working years left), and your existing debt obligations.
The Eligibility Calculation
Banks typically allow a maximum of 40% to 50% of your net monthly income to be used for EMIs.
- Calculate EMI Capacity: Net Salary × 50%
- Subtract Existing EMIs: EMI Capacity - Current EMIs = New Available EMI
- Calculate Max Principal: The bank reverse-calculates how much principal can be serviced by this New Available EMI over the chosen tenure.
Role of Credit Score
While this calculator gives you a mathematical eligibility amount, your actual approval and the interest rate offered will heavily depend on your CIBIL score. A score above 750 is generally required to get the best terms.