How does personal loan affordability change with my financial circumstances?

Personal loan affordability is directly linked to your financial circumstances, and lenders in India closely examine several factors before approving your application. Your income, current debts, credit score, and employment stability all play a significant role in how much you can borrow and the terms you receive. If your income goes up or you pay off other loans, your ability to afford a new personal loan improves. On the other hand, taking on more debt or facing a drop in income will reduce your affordability and loan eligibility.

Lenders use your debt-to-income (DTI) ratio to decide if you can handle another EMI. As per the latest RBI guidelines, your total EMIs should not be more than 50% of your monthly income. Many banks prefer a DTI ratio below 40% for easier approval and better terms. A higher income, a strong credit score (usually above 750), and stable employment can help you qualify for a bigger loan amount or lower interest rate.

Factors affecting personal loan affordability:

• Regular and stable monthly income
• Low existing debt and manageable EMIs
• High credit score and clean repayment history
• Consistent employment or business income
• Low fixed monthly expenses

Use online calculators to estimate how much EMI you can comfortably manage based on your income and expenses. Always borrow within your means and avoid stretching your budget. If your circumstances change after taking a loan—such as a job switch, pay cut, or new expenses—review your finances and adjust your repayment plan if needed. Staying on top of your financial situation helps you make smart borrowing decisions and maintain long-term affordability.