EMI Calculations and Checklists
Personal loan eligibility on your salary: how lenders use FOIR to set the amount
How Indian banks and NBFCs work out how much personal loan you can get from your income, existing EMIs and credit report, with FOIR worked examples and ways to improve eligibility.
Most lenders in India decide the maximum personal loan from your net monthly income and your FOIR (fixed obligations to income ratio): the share of income that all your EMIs, including the new one, may take. If an illustrative lender allows a FOIR of 50% and you earn ₹60,000 a month net with an existing EMI of ₹8,000, the most it will allow for a new EMI is 50% × 60,000 − 8,000 = ₹22,000. At 12% for 5 years that EMI supports a loan of about ₹9.9 lakh; over 3 years, about ₹6.6 lakh. Your credit report, employer, age and the lender's own policy then decide whether you get that amount and at what rate. FOIR limits are internal policy and differ between lenders.
This guide belongs to the personal loan EMI calculation guide.
What lenders check
| Test | What it means | Typical evidence |
|---|---|---|
| Minimum income | A floor below which the lender does not lend | Salary slips, bank statement, Form 16 or ITR |
| FOIR | Total EMIs ÷ net monthly income stays under the lender's cap | Credit report, bank statement showing EMI debits |
| Credit report | Repayment history, defaults, settlements, enquiries | Report pulled from a credit information company |
| Employment stability | Months in current job and total experience; business vintage for the self-employed | Appointment letter, ITRs, GST returns |
| Employer category | Lenders group employers by perceived stability | Employer name and type |
| Age and tenure | Loan should end within the lender's age limit | KYC |
| Residence | Serviceable city, stable address | KYC, address proof |
The FOIR calculation step by step
- Net monthly income. Take-home salary after tax, PF and other deductions. Some lenders count regular variable pay or rent; many do not.
- Existing obligations. All EMIs on home, car, two-wheeler, consumer and personal loans, and usually a percentage of your outstanding credit card balance even if you pay in full.
- FOIR cap. The lender's limit for your profile. A higher-income or preferred-employer applicant may be allowed a higher cap.
- Maximum new EMI = cap × net income − existing obligations.
- Maximum loan = the loan whose EMI equals the maximum new EMI at the offered rate and tenure.
The loan from an EMI uses the present value formula: Loan = EMI × (1 − (1 + r)^−n) ÷ r, where r = annual rate ÷ 1,200 and n = months.
Worked example (illustrative)
| Item | Amount |
|---|---|
| Net monthly salary | ₹60,000 |
| Lender's FOIR cap | 50% → ₹30,000 |
| Existing two-wheeler EMI | ₹8,000 |
| Maximum new EMI | ₹22,000 |
| Loan at 12%, 5 years | about ₹9,89,000 |
| Loan at 12%, 3 years | about ₹6,62,400 |
| Loan at 14%, 5 years | about ₹9,45,500 |
The amount a lender allows is not the amount you should borrow. Check the EMI against your household budget using the affordability list in the EMI calculation guide, and look at the total interest in the tenure guide.
Self-employed applicants
Lenders usually take income from the income tax return (often two or three years), the profit and loss account and bank statements, and sometimes GST returns. Cash income that does not show in the ITR or bank account is hard for a lender to count. Many lenders ask for a minimum period in business. A self-employed borrower using a "personal loan" mainly for the business should ask whether a business loan is more suitable, because the rules on rates and prepayment can differ; see foreclosure and prepayment charges.
Ways to improve eligibility honestly
| Action | Effect |
|---|---|
| Close a small loan with few EMIs left | Removes its EMI from your FOIR |
| Pay down revolving credit card balances | Lenders may count a share of card outstanding as an obligation |
| Choose a longer tenure | Lowers the EMI, raising the loan amount, but raises total interest |
| Add a co-applicant with income, if the lender allows | Combined income counts; the co-applicant is equally liable |
| Correct errors in your credit report first | A wrongly reported overdue can block approval |
| Apply where your salary is credited | The lender can see your income and conduct directly |
Do not inflate income, submit edited salary slips or bank statements, or let an agent "arrange" documents. That is fraud and can lead to recall of the loan, a negative record and legal action.
Why an application may still be declined
- A recent missed payment, write-off or settled account on your report.
- Many recent loan or card enquiries in a short time.
- Employer or city outside the lender's policy.
- Mismatch between your stated income and bank credits.
- Existing EMIs already near the FOIR cap.
Lenders are not required to approve a loan. Ask the lender in writing for the main reasons for rejection, then fix what you can before applying elsewhere, and avoid a string of rapid applications; see credit reports and scores.
Frequently asked questions
Is there one FOIR limit set by the RBI?
No. FOIR caps are each lender's credit policy. Figures used here are illustrative.
Does a pre-approved offer mean I am eligible for that amount?
It means the lender has made a preliminary assessment from data it holds. The final sanction may still depend on verification and the current credit report.
Does a credit card I pay in full count in FOIR?
Some lenders count a percentage of the outstanding balance or limit as an obligation. Ask how your lender treats it.
Can I get a personal loan without a salary slip?
Some lenders accept bank statements or ITRs instead, especially for the self-employed. Expect more checks and possibly a higher rate.
Sources
- Reserve Bank of India — Fair Practices Code and conduct rules for lenders
- TransUnion CIBIL — your credit report and score
- Income Tax Department e-filing portal — downloading ITRs and Form 26AS used as income proof
