Before a lender admires your salary, it asks a colder question: how much of that salary is already promised to someone else? The answer is FOIR — Fixed Obligation to Income Ratio — and it kills more loan applications than credit scores do.
The calculation
Most lenders cap this near 50% (premium salaried profiles sometimes get 55–65%).
Example: income ₹60,000, car EMI ₹9,000, card EMI ₹4,000. Headroom = 50% × 60,000 − 13,000 = ₹17,000 of new EMI. At ~12% for 5 years, that supports roughly a ₹7.6 lakh personal loan — regardless of what you applied for.
What counts as an obligation
- Counted: all loan EMIs, credit-card EMIs, and often a slice (~5%) of your card's outstanding balance even without an EMI plan.
- Usually not counted: rent, SIPs, insurance premiums, school fees — though some lenders factor rent for thin files. They don't count it, but your budget should.
- Guarantees: loans you've guaranteed can be counted against you if the primary borrower slips.
Five legitimate ways to raise your eligible amount
- Close small, ugly EMIs first. A ₹2,000 consumer-durable EMI blocks ~₹90,000 of loan eligibility. Clearing it before applying is instant headroom.
- Convert card outstanding to zero. Card debt is both expensive and FOIR-heavy — clear it before a big application.
- Stretch the tenure. Same amount, longer tenure, smaller EMI, lower FOIR. Prepay later to control total interest.
- Add a co-applicant. Combined income re-bases the whole calculation.
- Show all income. Verifiable rental income, a second job, annual bonus — documented income counts; undocumented doesn't.
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Frequently asked questions
What is a good FOIR for loan approval?
Under 40% is comfortable and approval-friendly; 40–50% is the typical acceptance zone; above 50% most lenders decline or reduce the sanctioned amount.
Is rent included in FOIR?
Most lenders exclude rent from FOIR, counting only debt EMIs and card obligations. A few include it for marginal profiles. Either way, factor rent into your own affordability maths.
How can I increase my loan eligibility quickly?
Close small EMIs and card outstandings before applying, choose a longer tenure, add an earning co-applicant, and document every income source. Each directly expands FOIR headroom.
Why was my loan approved for less than I asked?
The lender computed your FOIR headroom and sized the loan so the EMI fits within its cap (usually ~50% of net income including existing EMIs). Reduce obligations or extend tenure to qualify for more.
Solvifin is a loan-comparison and referral platform, not a lender. This guide is general information, not financial advice — final rates, eligibility and approval are always decided by the lender. RBI rules summarised here are simplified; refer to rbi.org.in for the authoritative text.