Eligibility Rules
How do banks calculate loan eligibility?
Banks use the FOIR (Fixed Obligation to Income Ratio) method. Typically, they allow 40% to 60% of your Net Monthly Income to go towards loan EMIs (including the new loan).
Typical FOIR Limits
- Home Loan: 50% - 60% (Since it's a secured, long-term asset).
- Personal Loan: 40% - 50% (Unsecured, higher risk).
- Car Loan: 50% - 55%.
How to increase your eligibility?
1. Clear existing small loans (credit card dues, personal loans).
2. Add a co-applicant (spouse/parent) with an income.
3. Choose a longer tenure (increases eligibility but also total interest).