Borrow Smart™ | Loans, Leverage & Borrowing
“I can afford the EMI.”
That sentence has probably sold more loans than almost anything else.
But EMI affordability can be misleading.
Suppose someone earns ₹2 lakh a month.
A bank offers a loan with a ₹60,000 EMI.
The borrower says:
“I can manage ₹60,000.”
Maybe.
But what happens after:
₹60,000 EMI
₹25,000 school fees
₹30,000 household expenses
₹15,000 insurance
₹20,000 existing commitments
₹10,000 discretionary spending
Suddenly, the ₹60,000 EMI looks different.
EMI is only one line on the balance sheet
Affordability is about cash flow after all obligations.
Not merely whether today’s salary can technically accommodate the EMI.
My Borrowing Capacity Equation
Think in terms of:
Stable income
minus
Essential living costs
minus
Existing debt obligations
minus
Insurance / essential commitments
minus
reasonable savings
equals
true borrowing capacity
The last line is important.
If the EMI prevents you from saving anything, the loan may be technically payable but financially unhealthy.
What happens when income falls?
This is the question most borrowers don’t ask.
What if:
- bonus disappears?
- business slows down?
- job changes?
- medical expense arises?
- family responsibility increases?
A loan that works only when everything goes perfectly is not necessarily a comfortable loan.
The Six-Month Test
Before taking a significant loan, ask:
“If my income dropped materially for six months, could I still service this?”
If the answer is no, consider:
- lower borrowing
- larger down payment
- longer liquidity runway
- different asset
- postponing the purchase
Decision Room
You qualify for a ₹1 crore loan.
That doesn’t mean you should take ₹1 crore.
Bank eligibility is not personal affordability.
The bank answers:
“Can we lend?”
You should answer:
“Should I borrow?”
The lesson
The size of the loan you qualify for is a lending decision.
The size of the loan you should take is a life decision.
Never confuse the two.
Before you sign:
Don’t calculate only the EMI.
Calculate the life around the EMI.
— Joydeep Bagchi
Borrow Smart™ | Income Beyond Salary
