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Monthly income Rs. 25,000. How much car loan can I have?
  • I am thinking of buying a new car. My current net monthly income is Rs. 25,000 and there are no liabilities, EMIs etc. to be paid by me. How much car loan can I expect to get from premium lending institutions like HDFC, SBI etc.
  • Hi and welcome to the forum. 

    Congratulation on your decision of buying a new car.

    Calculation of loan eligibility is a complex process and varies from lender to lender. Different lenders use different calculation methodology to determine your loan eligibility. You can find a blog post on this website, which details the process through which most of the banks determine your loan eligibility depending upon three primary ratios.

    • Fixed obligation to income ratio (FOIR)
    • Loan to Value ratio (LTV), and
    • Installment to income ratio (IIR)

    Since you have already mentioned that there are no other financial obligations or instruments to be paid by you on a monthly basis, your chances of getting a higher loan amounts sanctioned are bright. You can safely assume to get a 35% to 40% of installment to income ratio.

    This means that you may be eligible for a car loan, whose EMI comes out to be any around Rs. 9,000 - Rs. 10,000 per month. 

    A quick, back of the envelope calculations will show that this will allow you to take out a loan of about Rs. 2.75 lakhs assuming the loan period of three years and interest rate of 14% per annum. The exact figure comes out to be Rs. 9,399 per month of EMI. 

    For more details we encourage you to download the basic MS Excel EMI calculator from the download section of this website.