When you apply for a Home Loan, there are quite a few aspects that the bank or the NBFC will look into before sanctioning your loan. They would want to be sure that the person they are lending the money to has the repayment capacity to repay their money over a period of time. Hence, one has to be eligible to apply for the loan and certain factors come into play. One could use a Home Loan eligibility calculator to determine whether they are eligible to apply for a loan or not and there are many banks and NBFCs like Bajaj Finserv which have their own eligibility calculators that the prospective borrower could make use of.
Since now Home Loan application online are mostly the norm, a few things would be looked into as soon as you make the application.
The first thing that the lender would want to know is what the amount of the Home Loan you want is- that is, what is principal amount of the loan you are applying for.
The next question would be that what is the period over which you want to take the loan for- that is, what is the tenure of the loan going to be?
Thirdly, the bank would want to know the income of the borrower- not only what he makes through his salary but whether there are any additional sources of income or not.
Lastly, the bank or NBFC calculator will punch in the interest rate they are offering- the Home Loan interest rate that is going to determine the amount of the premium one would be paying as EMIs during the duration of the tenure.
Even after the application has been approved, a final round of verification would be required and some documents would have to be submitted and only when they are in place, the loan would be finally disbursed.
When all these factors are complied with, the calculator will show the EMI payments that one would have to make each month. Now, considering the fact that a bank or NBFC would only be able to take about 55% of the salary into account for repayment, this amount should be lower than that percentage of the salary. If not, then the person will not be able to repay the loan as there are also financial responsibilities at home to comply with. Borrowing money to such a lender would be a risk as there could be chances that he would be falling behind on payment. Moreover, it is also not a good idea for a borrower to cut his EMI to close to the disposable income he has after taking care of his responsibilities because sudden emergency expenses at home would also result in making huge payments at that time, risking defaulting on the EMIs which could cost big time. Not only would it affect the credit score but one would have to comply with dues and fines making the process a lot more expensive.