What is loan eligibility?
Loan eligibility is the maximum loan amount a bank will sanction given your income, existing EMI obligations, and the bank’s FOIR cap. The formula is universal across Indian retail credit — only the FOIR cap and rate vary by lender and product.
How is it calculated?
Available EMI room = (net monthly income × FOIR cap %) − existing EMIs
Maximum loan amount = Available EMI room ÷ EMI-per-rupee
Where EMI-per-rupee is the monthly EMI for ₹1 of principal at the loan rate over the chosen tenure (computed via the standard reducing-balance formula).
Worked example — ₹1L net salary, ₹15K existing EMI, 55% FOIR cap, 8.5% / 240 months:
- Total EMI budget = 1,00,000 × 0.55 = ₹55,000
- Available EMI room = 55,000 − 15,000 = ₹40,000
- EMI per ₹1 lakh @ 8.5%/240mo = ₹867.82
- Maximum loan = 40,000 ÷ 867.82 × 1,00,000 = ₹46,09,000
Indian FOIR caps (typical)
| Net monthly income | Typical FOIR cap |
|---|---|
| Below ₹25,000 | 40%–45% |
| ₹25,000 – ₹40,000 | 45%–50% |
| ₹40,000 – ₹1,00,000 | 50%–55% |
| ₹1,00,000 – ₹3,00,000 | 55%–60% |
| Above ₹3,00,000 | 60%–65% |
Use 55% as a sensible default if you don’t know your bank’s exact cap.
What hurts eligibility
- Existing EMIs — every ₹10K of existing EMI cuts ~₹11.5L from a 20-year home loan eligibility
- Credit-card revolving balance — the minimum-due is treated as an EMI by some banks
- Variable pay heavy structure — banks often count 50%–70% of variable pay
- Self-employed without 2-year ITR — significantly stricter underwriting
- Low CIBIL score — bumps the rate, which cuts eligibility
Levers to increase eligibility (fast)
- Close a small high-EMI loan — closing a 5-year-old ₹15K personal loan EMI gives you back ~₹17.5L of home-loan headroom
- Add an earning co-applicant (spouse, parent if working)
- Extend tenure to 30 years (where bank allows)
- Choose a bank with higher FOIR cap for your income bracket
Related glossary entries
- FOIR · EMI · Credit score