The Thumb rule for calculating eligibility:
Net salary per month is calculated after tax deductions then 40% to 65% of that amount is taken as loan servicing capability [appraised income].
If one has additional income like Incentives, Overtime, LTA, Medical Reimbursements, Car Allowance etc. then it is averaged out to per month’s income & only 25% to 50% of the same is considered for eligibility. If you have any ongoing obligation then it is deducted from the appraised income, this amount is then divided by EMI per lacs for the considered term, and the arrived figure is the eligibility in lacs.
Example shown below
Net Salary pm after tax deduction = 80,000/-
Averaged out incentive pm = 20,000/-
Averaged out LTA pm = 2,000/-
Current Personal Loan EMI = 5,500/-
Loan Calculation based on the above information:
50% of Net salary = 40,000/-
25% of Incentive = 5,000/-
25% of LTA = 500/-
Appraised Income = 45,500/-
Appraised Income [-] less] ongoing EMI = Final Income to be considered.
45,500 [-] 5,500 = 40,000/-
Suppose the loan is @ 10% for 20 years; then EMI per lac @ 10% for 20 years is Rs.965/-
The eligibility would be Final Income / EMI per lac for the tenor.
40,000 / 965 = 41.45 lacs
Hence, the eligibility is Rs. 41.45 lacs @ 10% for 20 years. Every banks has its own method for calculating eligibility. It is advisable to check the eligibility with the concerned person.
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