How Much of a Father’s Income is Required for a 20 to 30 Lakh Education Loan?

To determine how much of a father’s income would be required to service an education loan of 20 to 30 lakh INR, we need to consider a few key factors. This article will guide you through the calculation process, including the loan amount, interest rate, loan tenure, and the resulting Equated Monthly Installments (EMIs).

Key Factors in Calculation

Loan Amount: 20-30 lakh INR Interest Rate: Typically ranges from 8 to 12 percent per annum, let’s assume an average of 10 percent Loan Tenure: Common tenures for education loans range from 5 to 10 years Equated Monthly Installment (EMI): Calculated using the formula: (EMI frac{P times r times (1 r)^n}{(1 r)^n - 1})

EMI Calculation for a 20 Lakh Loan

5-Year Tenure

(P 2000000) (r frac{10}{100 times 12} 0.00833) (n 5 times 12 60)

The EMI can be calculated as:

EMI frac{2000000 times 0.00833 times (1 0.00833)^{60}}{(1 0.00833)^{60} - 1} approx 42000) INR

10-Year Tenure

(n 10 times 12 120)

The EMI will be:

EMI approx 26000) INR

EMI Calculation for a 30 Lakh Loan

5-Year Tenure

The EMI can be calculated as:

EMI approx 63000) INR

10-Year Tenure

The EMI will be:

EMI approx 39000) INR

Total Annual Payment

To find out how much income is required, we can annualize the EMIs:

5-Year Tenure: (20 Lakh: 42000 times 12 504000) INR (30 Lakh: 63000 times 12 756000) INR 10-Year Tenure: (20 Lakh: 26000 times 12 312000) INR (30 Lakh: 39000 times 12 468000) INR

Income Requirement

A common guideline is that loan EMIs should not exceed 40-50 percent of a borrower’s monthly income. Therefore:

20 Lakh 5 years: (Monthly Income Required EMI / 0.4 42000 / 0.4 105000) INR 20 Lakh 10 years: (Monthly Income Required 26000 / 0.4 65000) INR 30 Lakh 5 years: (Monthly Income Required 63000 / 0.4 157500) INR 30 Lakh 10 years: (Monthly Income Required 39000 / 0.4 97500) INR

Conclusion

For a 20 lakh loan, a father’s monthly income should ideally be around 65,000 to 105,000 INR. For a 30 lakh loan, it should be around 97,500 to 157,500 INR. These figures can vary based on the specific terms of the loan, the interest rate, and the financial situation of the family, including other obligations.