LAP eligibility calculator (self-employed)

How lenders assess a self-employed borrower

A self-employed borrower has no salary slip, so the lender builds up eligible income from the income tax returns and financial statements, usually the average of the last two years:

• Profit before tax is the starting point.
• Depreciation is added back because it is not a cash expense.
• Interest on loans whose EMIs are already counted in obligations is added back, so it isn't counted twice.
• Other income is often taken only in part (50% is common) because it may not recur.
• Payments to relatives who aren't co-applicants are sometimes added back as income kept within the family.
• Tax is deducted.

A co-applicant's income (a partner's or spouse's business profit, remuneration, rent) can be added, again with a discount on less stable heads like rent.

How to use this calculator

1. Enter two years of each income head in ₹ lakh, and the % taken for each head as per the lender's policy.
2. Open Add co-applicant income if there is one.
3. Enter existing EMIs, the proposed loan, interest rate, tenure and property value.
4. Enter the lender's maximum FOIR and maximum LTV.

The formula

• Eligible income = Σ (average of two years × % taken) − tax
• FOIR = (Existing EMIs + EMI of the new loan) ÷ Monthly eligible income
• LTV = Loan ÷ Property value
• Maximum loan = the lower of the loan the income supports at the maximum FOIR and the loan the property supports at the maximum LTV

Worked example

Average PBT ₹37 lakh, depreciation ₹5.5 lakh, interest added back ₹4 lakh, other income ₹2 lakh taken at 50% and tax ₹11 lakh give eligible income of ₹36.50 lakh a year (₹3,04,167 a month). With existing EMIs of ₹50,000, a proposed ₹150 lakh loan at 9% for 15 years has an EMI of ₹1,52,140:

• FOIR: (1,52,140 + 50,000) ÷ 3,04,167 = 66.5%
• LTV on a ₹300 lakh property: 50%
• At a 70% FOIR the income supports ₹160.63 lakh; at a 60% LTV the property supports ₹180 lakh. Maximum loan: ₹160.63 lakh, so the proposal fits.

Frequently asked questions

What FOIR and LTV do lenders allow on LAP? It varies by lender, income level and property type. LTV on residential property is usually higher than on commercial or industrial property. Check the lender's policy and change the limits in the calculator.

What is "FOIR + LTV"? Some lenders cap the sum of FOIR and LTV, so a high FOIR must be balanced by a lower LTV and the other way round. The calculator shows the sum for that check.