When you’re looking to take a loan, the first thing you should do is determine how much money you can afford to borrow. This is called your EMI amount. Hence if two companies are offering the same product at different EMIs selecting the right EMI is not as easy as using an online GST calculator.
So do you need to raise the EMI amount and tenure for your loan? Have you tried hard to choose the right EMI amount, tenure and rate? It’s not as difficult as it looks. With the help of some factors, a consumer can easily calculate the EMI amount that is perfect for his/her pocket and helps in building a good credit score. So let’s find out how:
Take stock of your income and expenses
First, assess how much income you have in terms of salary, pension and other sources of income.
To do this separate your monthly income into two categories: recurring and irregular. Recurring income is the type of income that you receive month-to-month, like paychecks or Social Security benefits. This can include things like rent, mortgage payments, car loans, and other basic expenses that you know you’ll need to pay each month so they’re not a surprise at the end of the month. Irregular expenses are ones that are less predictable — for example, if you want to buy a house, it might require you to make extra payments until it’s paid off.
You need to calculate how much money is required for paying for EMIs. If this amount is less than one-third of your total income, then it is advisable to opt for a lower tenure.
You will also have to take stock of the amount of income you earn every month, and how much it can cover essentials like food, clothing, transportation and utilities. If you earn more than what’s required, you may have some extra money left over at the end of the month. This will help you decide on the right EMI amount for your loan.
Account for existing and future liabilities
It’s important not to underestimate this aspect of your finances as there could be other liabilities such as car loans or credit cards. These should also be taken into account when calculating your required monthly repayment amount.
Try out different possibilities with an EMI calculator
If you’re unsure about choosing an EMI tenure that works for your current situation, try out different options with an emi calculator for business loan or for various products, which is especially useful if you want to calculate EMI for a housing loan. This is because these calculators can give a broad range of possible rates based on various factors such as region, industry and even the number of people living in the property.