Loan approval feels opaque from the outside, but the arithmetic is mostly mechanical. Two ratios do the heavy lifting, and a handful of checks decide the rest.
FOIR — the income ceiling
The Fixed Obligation to Income Ratio is the share of your net monthly income a lender will let you commit to EMIs, including the new loan and everything you already pay. Most lenders work between 50% and 60%, tightening at lower incomes and loosening for high earners.
On a net income of ₹1,00,000 with ₹8,000 of existing EMIs, a 50% FOIR leaves ₹42,000 for a new EMI — which supports roughly ₹48.5 lakh over twenty years at 8.5%. Clear that ₹8,000 obligation and eligibility rises by nearly ₹9 lakh. This is why paying off a small loan before applying for a large one is often the highest-return thing you can do.
LTV — the security ceiling
For secured loans a second cap applies to the asset:
- Home loans: 90% of value under ₹30 lakh, 80% up to ₹75 lakh, 75% above
- Loan against property: 50% to 70% of the lender's valuation
- Gold loans: 75%, capped by RBI
- Car loans: 80% to 100% of ex-showroom price
You receive the lower of the FOIR figure and the LTV figure. Most applicants assume income is the binding constraint; on modest properties with strong salaries it is usually the LTV.
The checks that decline otherwise good files
- Cheque bounces in the last twelve months of bank statements — the fastest route to a decline, particularly for business loans
- Job stability — most lenders want two years of total experience and six to twelve months with the current employer
- Employer category — banks maintain internal lists; listed companies and government bodies get better rates and higher FOIR bands
- Age at maturity — the loan must end before you turn 60 to 70, which quietly shortens the tenure available to older applicants
- Recent enquiries — several applications in a short window read as distress
- Property or title issues — unapproved construction, unclear chain of title or disputed land will stop a home loan regardless of your profile
Levers that genuinely raise eligibility
Add a co-applicant with income. Incomes are pooled under the same FOIR, and it is the single largest lever available.
Clear small obligations. Every ₹1,000 of existing EMI removed adds roughly ₹1.1 lakh of home loan eligibility over twenty years at 8.5%.
Declare all income. Rental income, documented variable pay and bonuses count where evidenced — many applicants only submit the basic salary slip.
Extend the tenure — carefully. It raises eligibility and total interest together. Use it to qualify, then prepay to shorten.
Model any of these in the eligibility calculator before you apply anywhere.
Why two lenders give different answers
FOIR bands, employer lists, treatment of variable pay and valuation practice are all internal policy. It is entirely normal for one bank to offer ₹45 lakh and another ₹62 lakh on the same file. That is a reason to compare, not a reason to assume the higher figure is generous — it may simply be a longer tenure.
Frequently asked questions
Fixed Obligation to Income Ratio — the proportion of your net monthly income a lender allows to be committed to EMIs, typically 50% to 60% including existing obligations.
FOIR bands, employer categorisation, how variable pay is treated and property valuation are all internal policy and differ between lenders. Check whether the higher offer simply uses a longer tenure.
Only if they have income. A co-applicant without income adds no borrowing capacity, though a co-owner may still be required for a property held jointly.