How Banks Actually Decide How Much to Lend You

Loan eligibility can feel like a mysterious number a bank hands you, but it's actually built from a fairly simple rule most lenders use in some form.

You can estimate your own number with our loan eligibility calculator, but here's the logic behind it.

The core idea: FOIR

FOIR — Fixed Obligation to Income Ratio — is the percentage of your monthly income lenders are comfortable seeing go toward fixed payments, including your new loan's EMI. Most lenders cap this somewhere between 40% and 60% of net monthly income, leaving the rest for living expenses and financial cushion.

Existing debt eats into your capacity first

If you already have EMIs running — a car loan, another personal loan, a credit card payment plan — those come out of your FOIR allowance before any new loan is considered. Someone with no existing debt and someone with several running EMIs can have very different eligibility even at the same income.

Why tenure changes the number so much

The same monthly EMI capacity supports a much larger loan amount over 20 years than over 5 years, since the total is spread across far more payments. This is part of why longer-tenure loans, like home loans, allow for much bigger amounts than shorter-tenure ones at the same income.

What this estimate can't tell you

Income and existing obligations are only part of what a lender actually evaluates. Credit score, employment stability, the specific lender's internal policy, and other factors all play a role in real approval decisions — a calculator can only estimate the income-based portion of that.

Use the loan eligibility calculator as a starting reference point before approaching a lender, not as a guaranteed number.