Struggling to get a personal loan approved despite having a steady income? Your existing EMIs might be the hidden reason why. Most people overlook one critical factor when applying for a personal loan — the Debt-to-Income (DTI) ratio.
In this blog by Shivafinz, we’ll explain what DTI is, why it matters to banks and NBFCs, and how you can improve your chances of getting that personal loan approved.
✅ What Is the Debt-to-Income (DTI) Ratio?
The Debt-to-Income ratio is the percentage of your monthly income that goes toward paying existing loans or EMIs (Equated Monthly Installments). It helps lenders determine if you have enough income left to afford a new loan.
📊 Why Is DTI So Important for Personal Loan Eligibility?
Banks and Non-Banking Financial Companies (NBFCs) use DTI as a risk assessment tool. If too much of your income is already committed to loan repayments, you become a high-risk borrower, even if your salary is high.
A high DTI suggests that:
- You may struggle to repay an additional loan.
- You are over-leveraged and closer to financial stress.
📉 Ideal Debt-to-Income Ratio for Personal Loans
Most lenders in India prefer a DTI between 36% and 40%. Here’s a simple example:
🧮 Suppose your monthly salary is ₹1,00,000
👉 Your total EMIs should not exceed ₹36,000–₹40,000
If you’re already paying ₹50,000 in EMIs, any new loan application is likely to be rejected or approved at high interest rates.
⚠️ How High DTI Affects Your Loan Approval:
- Lower loan eligibility
- Higher interest rates
- Shorter repayment tenures
- Loan rejection from reputed banks or NBFCs
🛠️ How to Improve Your Loan Eligibility:
- Pay off smaller loans before applying for a new one.
- Avoid taking multiple loans at once.
- Try to increase your income or show additional sources of revenue.
- Apply jointly with a co-applicant if possible.
🧠 Final Thoughts from Shivafinz
Your existing EMIs do affect your personal loan eligibility — and it’s all tied to your DTI. Keeping your debt manageable and planning your finances smartly will increase your chances of loan approval.
💼 Need professional guidance on improving your credit profile and getting loans approved?
Connect with Shivafinz today for expert financial consultation.