How to Use a Loan Affordability Calculator – Features and Benefits
Mr. Srivastav earns Rs. 80,000 per month; he utilises a part of that amount to meet general expenses, such as rent, utilities, etc. Apart from that, a certain percentage of his monthly income also goes towards a savings pot. Now, after deducting the total sum, the remaining amount can be utilised to pay the loan EMIs.
Before availing a high-value personal loan for meeting any monetary requirement, it is ideal to check how much you can avail based on the funds left from your income. A personal loan affordability calculator helps you assess that within a few seconds.
Features and Benefits of Loan Affordability Calculator
Personal loans come with no end-use restrictions feature, which is why one can utilise the funds to meet any kind of financial requirements. Additionally, the unsecured nature of this credit advance also allows borrowers to obtain a large amount without having to pledge their assets as collateral.
To avoid putting a strain on your monthly budget and manage your EMI obligations smoothly, checking your loan affordability should be your first step before availing of the loan. Here are some features and advantages this financial tool comes with:
- Convenient to use
These tools are available on every financial website, which makes them easily accessible. This is designed in a simple way so that anyone can use it with ease and make their financial decisions accordingly. One simply needs to enter the accurate values or use the sliders to adjust the values and get the result instantly. - Time-saving
From researching about the loan rates to contacting lenders and checking how much you can avail based on your income profile, the process becomes a little hectic. To save your time and help you make your financial decisions without any hassle, such financial tools have been introduced. You can obtain most of these details from the lender’s website and assess the loan affordability within a few seconds using this tool. - Minimal information needed
There are some specific details you need to enter in order to get a detailed idea about how much you will be able to afford. Such information mainly includes details about your finances so that the assessments can be done properly.
Other than these perks, a loan affordability calculator also helps in financial planning. It gives you an estimate of the exact amount you will be eligible for, how much your income should be to be able to borrow your asked amount, etc.
Note that the affordability aspect also differs from one borrower to another depending on the financial status. Based on the financial profile of borrowers, lenders offer customised offers, loan amounts, interest rates, etc. At Navi, eligible applicants can obtain a cash loan of up to Rs. 20 lakh at competitive interest rates. To avail of immediate financial assistance, download the Navi app now!
Check Your Personal Loan Eligibility
Loan Amount
Rate of Interest (P.a)
%
Loan Tenure (Months)
Monthly EMI
0
Total Interest
Total Amount
Factors Affecting Your Loan Affordability
Before you go ahead and assess your loan affordability, you should have a clear understanding of the aspects that influence this parameter. Find the factors below:
- Borrower’s Income
This is the primary aspect that lenders assess before deciding on the loan amount and interest rate. Generally, 30-45% of a borrower’s income should be allocated for EMI obligations. Therefore, one needs to have a substantial amount of monthly income to be able to afford the regular expenses along with EMI liabilities. - Existing EMIs
Financiers also check whether the applicant has already availed of another loan. Note that this automatically decreases a borrower’s loan affordability as lenders find it risky to sanction funds to someone who already has fixed liabilities. - Expenses
A specific percentage of a borrower’s monthly income goes towards general expenditures. The more one spends on these, the lesser he/she will be able to utilise to repay the loan amount. Note that while making assessments using a loan affordability calculator, it is advisable to consider inflation and future expenses as well.
Apart from these, the overall lifestyle, borrower’s risk appetite, etc., also play significant roles in determining loan affordability.
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How to use the loan Affordability Calculator?
Now that you have a better understanding of the usage and primary aspects of a loan affordability calculator, you should know how to use it. Here are some simple steps you need to follow for that:
- Step 1: Go to the online portal of the lender to find this financial tool.
- Step 2: Once you are able to find the loan affordability calculator, enter the necessary values.
- Step 3: Click on submit to get the result almost instantaneously.
In case you see that the amount you are eligible for does not match the amount you want to acquire, there are certain ways to change it.
Tips to Improve Loan Affordability and Eligibility
Here are some ways you can improve your loan eligibility and affordability so that you are able to borrow more than what lenders are offering you at this moment:
- Pay off existing dues: Before involving yourself in such a commitment, make sure you do not have any outstanding amount to repay. In case you have existing loans, start paying the EMIs on time and close them before availing of a personal loan.
- Include other income sources: In case you have more than one source of income, mention it while submitting the loan application. Also, including someone with a good repayment track record and decent income as a co-applicant inevitably increases loan affordability.
- Maintain a good credit score: Start making EMI payments on time so that your repayment track record stays clean. Additionally, avoid submitting multiple loan applications as that indirectly hampers borrowers’ credit rating.
Furthermore, you can also go for a longer repayment tenure to improve your loan eligibility and affordability. However, keep in mind that doing so will also increase your overall interest outgo. Therefore, just like using a loan affordability calculator, consider making use of an EMI calculator to evaluate your repayment capability.
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Final Word
Easy access to internet technologies has made things extremely easier for the tech-savvy generation. Before making any investments or acquiring a sizable amount as a loan, individuals can assess their repayment capacity, check loan affordability, etc., using different online financial tools. A loan affordability calculator shows how much you can afford so that you do not end up obtaining more than that and find yourself in a debt trap.
FAQs
Ans: You do not need to bear any charges when using a personal loan affordability calculator. Financial institutions allow loan applicants to utilise such an online tool completely free of cost. In fact, you can compute loan liabilities as many times as you want without incurring a charge.
Ans: A personal loan’s repayment tenure determines not only your EMIs but also total interest liabilities. An increase in the repayment period results in higher interest costs for the loan. However, opting for a longer tenure reduces your monthly outgo.
Ans: Lenders do not offer a personal loan to people with zero income. However, such an applicant can borrow alongside an earning co-applicant. In such a case, financial institutions will consider the co-borrower’s income before lending.
Ans: If you are using a credit card, the easiest way to build your CIBIL score is to pay off your credit card debt. Apart from this, maintaining a perfect credit mix of secured and unsecured loans can help improve your credit score.
Ans: Foreclosing a personal loan refers to clearing your dues before the loan’s tenure runs out. By doing this, you stand the chance of saving on interest costs. However, most lenders charge a fee for foreclosure, which you must consider beforehand.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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