In today’s world, getting a loan is as easy as clicking a button — personal loans, home loans, car loans… the offers just keep coming! But while loans can help us achieve dreams like owning a home or upgrading to a better car, it’s super important to borrow smartly. One golden rule? Keep your total EMIs within 30-40% of your monthly income.
Why 30-40%? This isn’t just a random number. Financial experts (and even banks) recommend this as a healthy limit. It’s the sweet spot where you can repay loans comfortably, without putting too much pressure on your daily life or long-term goals. Even the Reserve Bank of India (RBI) uses this benchmark when guiding lenders.
If you go beyond this limit, things can start getting tricky. A study by TransUnion CIBIL (2023) found that families spending more than 50% of their income on EMIs were three times more likely to miss repayments in tough times compared to those who stayed within the 30-40% range. That’s a huge risk to your peace of mind!
As N. R. Narayana Murthy once said: “Borrow only when it is absolutely necessary, and always within your means.” It’s advice worth holding close — because over-borrowing can shrink your ability to save, invest, or handle emergencies.
Imagine this: an unexpected medical expense, a job loss, or a family event — if your EMIs are eating up too much of your income, you’ll have little room to breathe. On the flip side, sensible borrowing keeps you ready for both life’s joys and challenges.
So, before signing on the dotted line, do a quick check — what’s your debt-to-income (DTI) ratio? That’s your total EMIs divided by your monthly income. If it’s crossing 40%, pause and think. Can you reduce the loan amount? Save more for a bigger down payment? Stretch the loan tenure a bit to lower the EMI?
Rakesh Jhunjhunwala wisely puts it: “Respect the power of leverage, but never let it overpower you.”
At the end of the day, managing your loans well is just as important as growing your savings. Stay balanced, stay smart — and let debt be your helper, not your master.
Have questions about managing debt or planning EMIs? I’m just a message away—let’s make your money work for you!
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