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Include salary, business income, and other regular income
Income minus expenses minus existing loans
Banks allow 40% of disposable income for new loans
Based on what you can afford monthly at market rates
In Kenya, banks typically allow you to borrow up to 3-4 times your monthly salary, depending on your existing debt and expenses. For example, if you earn KES 100,000 per month, you may qualify for a loan of KES 300,000 to KES 400,000.
A healthy debt-to-income ratio in Kenya is below 40%. This means your total monthly debt payments should not exceed 40% of your gross monthly income. Ratios above 50% are considered high risk.
Banks calculate affordability by: 1) Verifying your income, 2) Calculating expenses and existing debt, 3) Determining disposable income, 4) Applying a debt service ratio (typically 40%), and 5) Calculating maximum loan amount based on what you can afford monthly.
Not necessarily. Consider: Do you have emergency savings? Will the payment leave room for unexpected expenses? Can you afford it if your income decreases? Borrow what you need, not what you can get.
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