EMI Planning: What Should Be Your EMI If You Earn ₹50,000 Per Month?

If your monthly income is ₹50,000 and you’re planning to take a loan, one of the first questions that comes to mind is how much EMI you can manage. While the answer varies from person to person. 

What is an EMI? 

EMI, or equated monthly instalment, is the fixed amount you pay to the lender every month until the loan is fully repaid. It includes both the principal and the interest. The EMI amount depends on three main inputs: the loan amount, the rate of interest, and the tenure of the loan.  

The 40-50% Rule for EMIs 

Financial planners may recommend that your total EMIs should not exceed 40% to 50% of your monthly income. This rule ensures that you have enough left over for daily expenses, savings, emergencies, and lifestyle costs. 

• At 40% of ₹50,000, your EMI limit would be ₹20,000 

• At 50% of ₹50,000, your EMI limit would be ₹25,000 

This means you should ideally choose a loan tenure and amount that keeps your monthly EMI between ₹20,000 and ₹25,000. Staying closer to the 40% mark is safer, especially if you have other financial commitments or dependents. 

For example, you are thinking of taking a loan of ₹5 lakh with an interest rate of 10% per annum for a period of 5 years. Then your monthly EMI would be ₹10,624 per month. If you increase the loan about to 10 lakh, at the same interest rate and tenure, your EMI will be ₹21,247 per month.  

This can change depending on 3 important factors: loan amount, interest rate and tenure of the loan.  You can use an EMI Calculator and calculate the EMI.  

However, note that this 40-50% is not a fixed rule, this can vary person to person depending on their monthly expenses.  

How to Decide the Loan Amount? 

To determine how much loan you can take while staying within the comfortable EMI range, consider the following: 

• Interest rate offered by the lender 

• Loan tenure (shorter tenure = higher EMI, longer tenure = lower EMI but more interest) 

• Type of loan (home, personal, car, etc.) 

While the EMI is a monthly commitment, other financial responsibilities like rent, groceries, savings, and personal expenses also demand attention. So before finalising any loan, it’s important to check whether the monthly instalment fits comfortably within your existing budget.  

In addition to the loan amount and tenure, the interest rate offered by the lender is a critical factor. Even a slight change in the interest rate can affect the EMI over time. Similarly, choosing a shorter repayment period may lead to higher EMIs, but the total interest you pay over the loan term will be lower. On the other hand, a longer tenure reduces your EMI but increases the overall interest burden. These are decisions you can explore through the calculator by comparing different scenarios. 

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Conclusion  

There’s no one-size-fits-all answer to what EMI you should pay on a ₹50,000 salary. Paying more than you can handle might disrupt your monthly budget and financial goals, while paying too little might increase your loan tenure and total interest outgo. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.