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Tata Capital > Blog > Personal Use Loan > What Is NMI In Loan?

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What Is NMI In Loan?

What Is NMI In Loan?

When you think of purchasing the dream home, getting higher education, or buying a shiny new vehicle, loans are often the go-to solution for making these aspirations a reality.

But here's the thing: as you have been exploring loan options, you've probably stumbled upon the term "NMI in loans." If you're scratching your head wondering what on earth that means, don't worry.

This article will explain in detail NMI’s meaning in loans, its role in obtaining loans, and how to calculate it.

What is NMI in loans?

NMI, or Net Monthly Income, is the disposable income that a borrower receives every month after deducting taxes and expenses. It is an essential factor that lenders in India consider when assessing a borrower's loan eligibility. Lenders typically want to see that borrowers have enough NMI to cover their monthly living expenses and make the monthly loan payments.

Is NMI in a loan the same as EMI? The answer is no. EMI stands for "Equated Monthly Installment." It refers to the fixed amount that a borrower must pay each month to the lender to repay a loan. It is commonly used for various types of loans, including home, car, and personal loans.

What's the importance of NMI in loans?

A higher NMI indicates that borrowers have more disposable income to cover their monthly loan payments. This makes them more attractive borrowers to lenders, as they are more likely to be able to repay the loan on time and in full.

Lenders typically have a minimum NMI requirement that borrowers must meet in order to qualify for a loan. This requirement varies depending on the type of loan and the lender. For example, a lender may require a minimum NMI of 30% for a mortgage loan but only 20% for a personal loan.

If a borrower's NMI is below the lender's minimum requirement, they may be denied a loan. There are, however, lenders who offer loans to borrowers with lower NMIs but may charge higher interest rates or require collateral.

How to calculate NMI in loans?

You can easily calculate your NMI in loans. Let us consider an example to understand this.

Let's say Ayush has a gross monthly income of Rs 1,00,000. He pays Rs 10,000 in taxes each month, and his standard of living expenses is Rs 20,000.

Then Ayush’s NMI would be Rs 1,00,000 - Rs 10,000- Rs 20,000 = Rs 70,000

Hence, Ayush's NMI would be Rs 70,000.

The EMI/NMI ratio is one of the crucial factors lenders use to calculate loan eligibility. Banks and financial institutions use it to determine the loan eligibility amount for which a prospective borrower is eligible. The EMI/NMI ratio is calculated by dividing the borrower's monthly EMI by their monthly NMI.

Using the previous example, let's say a lender has an EMI/NMI of 25% for this income slab. In that case, the maximum EMI amount Ayush can opt for is 25% of INR 75,000 = Rs 17,500.

The bottom line

NMI in loans holds a significant place among the factors considered when applying for a loan. Therefore, it's crucial to consider it before applying for a loan. If your NMI is relatively low, there are many ways to increase it, including paying off your debts and cutting down on your expenses.

Moreover, you can use Tata Capital’s personal loan EMI calculator to calculate your EMIs. We offer collateral-free personal loans up to upto Rs 35 lakhs with minimal documentation at attractive interest rates. 


1. What is the difference between EMI and NMI?

NMI in loans is the monthly income after deducting taxes, monthly expenses, and ongoing EMIs. EMI, on the other hand, is the monthly instalments that you pay to the lender to repay the loan.

2. What is the EMI NMI for a home loan?

EMI NMI ratio varies for different net annual income slabs. However, you can use our home loan EMI calculator to calculate your EMI.

3. How to calculate the NMI?

To calculate NMI in loans, deduct the monthly expenses, ongoing EMIs and taxes from your gross monthly income.

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