What is the EMI to salary ratio?

EMI to salary ratio refers to the percentage of your monthly EMI outgo relative to your monthly gross salary. It indicates the share of your income that goes towards loan EMI payments such as home loan, car loan, personal loan, etc.

For example, if your gross monthly salary is ₹50,000 and your total loan EMI commitment is ₹15,000 per month, your EMI to salary ratio is 15,000/50,000 = 30%.

This ratio is an important factor lenders consider when deciding on loan eligibility. Many loan providers cap the EMI to salary percentage at around 40-60% based on your credit profile. This ensures that a significant portion of your income remains available for other expenses and contingencies.

As a thumb rule, try to limit your EMI to salary ratio within 30-40%. Having a very high ratio of, say, over 50% makes you highly vulnerable to defaulting if there is any disruption in income source.