One of the factors that affect the rate of interest of a loan is debt. It is not a secret that if you have a lot of debt then you will probably get a higher rate of interest. Still, it is not a surety that you will get a higher rate of interest. The reason is that even if you have lots of debt, if you have sufficient monthly or annual income to manage the debt then you may not have to pay a higher interest rate. However, how does your debt to income ratio affects the results of a personal loan EMI calculator?

Debt to Income Ratio

The loan eligibility is decided by numerous factors. So, when the rate of interest of a loan is decided, various factors are taken into account. These factors also include your debt and income. The reason why your debt is included is because the lender will want to know how much you already owe to other sources as it affects the odds of repayment. Similarly, your income is also a crucial part of the process. Even if you have a lot of debt, you may be able to manage it if you have a sufficient monthly or annual income. For example, if Rohan has a total debt of Rs. 1 lakh, but has a monthly salary of 1 lakh, then the lender will be at ease regarding the repayment of the loan. So, the debt to income ratio is crucial in impacting the result of personal loan EMI calculator.

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