At what time do you say stop to an increased EMI

Today, our generation is in the fast lane collecting assets decades before our parents ever did- gathering cars, houses, electronics by using the much easier loan rates than what our parents had .

Today, one can get a loan from SBI ( i just spoke to them today) upto 65% of their take home package. Now banks are being very cautious to try and ensure that the person can actually repay the loan that they take, but because they have a property in their name which they can sell off, this 65% should actually be the boderline of what one should be paying in EMI's.

So lets take a few calculations.

If your take home ( post tax) is at Rs 100,000 then the maximum that you should be paying in EMIs should be Rs65,000.

When you start looking at which things one should buy using debt- the answer is quite simple.

ONLY ASSETS

Usually people understand different things on what assets really mean. Is a car an asset? what about a home? (Look out for my next post on that.)

It is of utmost important to ensure that we have a good control on our EMI's .

What should we consider when we look at our EMI's
1. The Ratio of what we have in debt and what our income is should not be more than 65%
2. Ensure you have covered all your income areas-- rental income, income from job and assets.
3. Evaluate realistically what the growth in income will be- hopefully income will only increase as you become more experienced.
4. Increase in expenses- college, school, medical- whatever makes sense
5. Economy fluctuations- if you are in a recession- be more careful while taking a loan.

Each of the above parameters are equally important- if any of them are having a negative impact- be more careful.

Take care- be smart

Happy Investing

( dont forget to subscribe using the links on the right / or become a follower of the blog)