Loan Affordability Calculator

There are two honest answers to “can I afford this loan”, and they disagree. A lender wants to know how much of your income is already promised to other lenders. You want to know whether you can still run the house. Those are different sums with different inputs, and a single obligation ratio answers neither.

On the default figures the gap is not subtle. EMIs of ₹26,000 plus ₹18,000 of rent against ₹85,000 of income is 51.76% — that is roughly what a lender computes. Add the ₹15,000 that keeps the lights on and the food coming and it is 69.41%. The first number decides whether you get sanctioned. The second decides whether the loan ruins you. The old version of this page printed one figure lumping rent, bills and EMI together, labelled it against lender DTI thresholds, and so described a ratio no lender uses and no household lives by.

The tool now prints both, separately labelled, because the interesting case is when they diverge: a household a bank happily lends to, with nothing left at the end of the month.

The ratio lenders actually use is FOIR — fixed obligation to income ratio. It counts EMIs, and with most lenders it counts rent, because rent is a contractual monthly payment. It does not count groceries, school fees, fuel or medical costs, because those are assumed to flex under pressure. That assumption is doing a lot of work, and it is a statement about the lender’s recovery risk rather than about your life.

There is no RBI-prescribed FOIR ceiling. It is individual credit policy, which is why the field is editable instead of hardcoded, and why the honest answer to “what is the limit” is to ask the lender what they are applying to you. Ceilings commonly land somewhere between 40% and 60%, and move with income band, credit score, loan type and employer category — a higher income usually buys a higher ceiling, on the reasoning that the absolute rupees left over are larger.

What the tool does with that ceiling is more useful than the percentage. On the defaults a 60% ceiling against ₹85,000 of income allows ₹51,000 of obligations, and ₹44,000 is already committed, so ₹7,000 a month is spare — which at 9% over 20 years supports a loan of about ₹7.78 lakh. Drop the ceiling to 50% and the same household has no headroom at all: the allowance is ₹42,500 against ₹44,000 committed, and the honest output is that clearing ₹1,500 a month of existing EMI is what creates the first rupee of borrowing capacity. Ten points of credit policy is the difference between a ₹7.78 lakh sanction and nothing, on identical finances. That is the number worth arguing with a bank about, not the ratio.

This is the part almost nobody models, and it is why a rate rise feels painless and is not. On a floating rate loan the instalment usually stays exactly where it was, and the extra interest is absorbed by extending the loan. Your bank statement looks identical. The cost is measured in years, and it is invisible unless you go looking for it.

Take a ₹35,00,000 balance at 8.75% with 18 years left. The EMI is ₹32,231.16. One percentage point of rate rise, with the EMI untouched, turns 18 years into 22.0 years. Two points turns it into 33.7 years — fifteen years and eight months added to the loan, for a change that never appeared on a single statement.

Three points does something worse, and it has a name.

Every loan has a rate above which one month’s interest is larger than the whole EMI. Pay the instalment in full, on time, and the outstanding balance is higher than it was last month. This is negative amortisation, and for that ₹35,00,000 loan the line sits at 11.05% — just 2.3 points above the 8.75% it started at.

At that point the pleasant option disappears. RBI requires that extending the tenor must not result in negative amortisation, which means the lender cannot solve it by adding years, because adding years no longer works. Your EMI has to rise, or you have to prepay. On this loan, holding the original 18-year finish at 10.75% needs ₹36,700.47 a month — ₹4,469.31 more than you were paying.

The tool prints that break-even rate for your own loan, and how far above your current rate it sits. It is the single most useful number on a floating loan, and no statement will ever show it to you. A loan sitting two points below its break-even rate is in a different situation from one sitting six points below, even if both look identical this month.

The choice between a longer tenor and a higher EMI is then straightforward, once you can see both. Extending always costs more in total interest, so a higher EMI is the right answer whenever your leftover cash absorbs it — which is exactly why the tool checks the increase against your monthly slack rather than just printing it. If it does not fit, extend now and prepay later; prepayment is your right at any point.

One steady income and one steady rate, which is the model every EMI calculation uses and which no floating loan actually follows. Re-run it at each reset rather than treating a single answer as durable.

It also assumes the lender counts rent in FOIR and ignores your other living costs. That is the common treatment, not a universal rule — some lenders handle rent differently, and a few weigh obligations by loan type. Since FOIR is credit policy rather than regulation, the ceiling and the treatment are both worth asking about directly instead of inferring from a calculator.

The loan amount it derives is what your cash flow supports, not what you will be offered. A lender also applies a loan-to-value limit against the asset, checks your credit history, and forms a view on your employer and income stability. Cash flow is necessary and not sufficient.

Everything runs in your browser and nothing is stored between visits, which for a page holding your income and your debts is the correct default rather than a feature. Keep your own note of the figures if you want to compare against a reset later.