Before applying for a loan with the bank, one needs to understand that the amount of loan an individual is eligible for depends on a number of factors. A bank will not always approve the loan amount an individual applies for. The factors that are considered by the bank are the individuals income, their credit score, their credit history, their age, etc.
Every bank tries to ensure that the loan amount provided does not burden the borrower as this can lead to defaults. The bank will only approve a loan amount whose monthly EMI is no more than 60 percent of the borrowers salary. Another factor which is considered is the applicants credit history and credit score. The bank looks at these documents to find out the applicants spending patterns, the number of loans he has applied for in the past, defaults if any and also current loans he is liable to pay off. The applicants age is also an important factor that a bank takes into consideration. If the applicant is older, even with a high credit score he may not be able to get his application approved. The reason being the bank may fear that with the applicant close to retirement age, he may not be able to repay the loan back on time.
It is for this very reason that one must make use of an online EMI calculator before applying for a loan. Most banks provide an EMI calculator for their customers to use. An individuals EMI is calculated keeping in mind the principal loan amount, the tenure of the loan and interest charged. Online EMI calculators help one calculate their EMI correctly with ease. It also helps one plan their finances in advance. It is extremely important for applicants to be aware of the amount of EMI they may be required to pay each month. Any defaults in the repayment of the loan can seriously affect ones credit score and hence must be avoided at all costs.
An online EMI calculator is also helpful for borrowers who have applied for loans with a floating interest rate.A floating interest makes it unpredictable and difficult to calculate the EMI. One can use the EMI calculator to calculate an optimistic and pessimistic amount based on the changes in the interest rate. This helps one be prepared for both scenarios.
The process of obtaining a loan can be difficult for an applicant. It is for this very reason that when an applicants loan is approved he must do everything in his power to ensure that no defaults occur and that the loan is repaid in full on time.
Author Bio :- Neha Sharma is a finance student who loves to write in her free time. She has spent considerable time researching on EMI calculators. She wishes to give advice on the importance of using an online EMI calculator before applying for a loan in this article.