Before you commit to monthly instalments for a phone, appliance, laptop, or even bigger purchases, it’s crucial to check whether that EMI is financially smart or a potential debt trap. Financial experts recommend the simple “2‑6‑10 Rule” — a quick affordability check that helps you decide if buying on EMIs makes sense based on your income and repayment capacity.

Here’s what this rule means and how it can protect your finances:

📌 What Is the 2‑6‑10 Rule?

The 2‑6‑10 Rule gives you three easy guidelines before taking an EMI loan:

🔹 2 — Price ≤ 50% of Monthly Salary

The total purchase price of the item should not exceed half of your monthly income.
➡️ For example: If your monthly salary is ₹50,000, you should ideally avoid buying something that costs more than ₹25,000 on EMI. This keeps the purchase proportional to what you earn and prevents over‑stretching your budget.

🔹 6 — EMI Tenure ≤ 6 Months

Keep the EMI repayment period short — ideally six months or less.
➡️ Longer tenures (12–24 months or more) make the product’s cost drag on for years, and you end up paying more in interest and feeling stuck in debt.

🔹 10 — EMI ≤ 10% of Monthly Income

Your monthly EMI payment should be no more than 10% of your in‑hand salary.
➡️ If your salary is ₹40,000 per month, your EMI should ideally be ₹4,000 or less — leaving enough for daily expenses, savings and emergencies.

💡 Why This Rule Matters

🧠 1. Keeps Debt in Check

When you restrict the EMI amount and tenure, you reduce the risk of long‑term liabilities that eat into your monthly cash flow.

💰 2. Prevents Budget Stress

Too many or too large EMIs can begin to crowd out savings and essential expenses, especially when unexpected costs arise like medical emergencies or repairs.

📉 3. Avoids Overborrowing

Many people assume that easy loan approvals mean they can afford big purchases — but without rules like this, EMIs can quietly become a financial burden.

🧠 Real‑Life Example

Suppose your take‑home salary is ₹60,000/‑:

✔️ Maximum safe EMI:
10% rule → ₹6,000/month or less

✔️ Maximum item price:
2 rule → ₹60,000 × 50% = ₹30,000 maximum recommended

✔️ Pay off fast:
6 rule → aim to repay within 6 months, so ₹6,000 × 6 = ₹36,000 total

If the cost exceeds these limits — even if interest is low — it could stretch your budget or force you to take longer tenure EMIs, increasing total cost.

📉 Common Mistakes people Make with EMIs

• Stretching EMIs over long tenures (12‑24 months) to lower monthly payments, but end up paying much more interest.
• Ignoring how many existing EMIs they already have, which can push total repayments above safe limits like 30–40% of income (a widely suggested cap).
• Buying depreciating items (phones, gadgets) on EMIs even if they’re not value‑adding assets — making real cost high.

🧠 Bottom Line: Buy Smart, Not Just Easy

EMIs can make purchases manageable, but easy repayment doesn’t always mean smart borrowing. The 2‑6‑10 Rule gives a simple, income‑based reality check:

✅ Only buy if price fits your income
✅ Only borrow if you can repay quickly
✅ Only take EMIs that don’t strain your monthly budget

Following this formula will help you stay debt‑free and financially secure — instead of committing to instalments that slowly eat into your future savings.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.