Loan Eligibility: What Lenders Look For
Eligibility determines both how much you can borrow and at what rate. Lenders assess two things: your ability to repay (income, existing EMIs) and your track record of repaying on time (credit score).
CIBIL Score Bands
| Score | Rating | Typical Impact |
|---|---|---|
| 750–900 | Excellent | Best rates, fastest approval, higher loan amounts |
| 650–749 | Fair | Approved, but at a higher rate or with more scrutiny |
| Below 650 | Needs work | Likely rejected by banks; NBFCs may lend at a premium |
FOIR: The Ratio That Sets Your Limit
FOIR (Fixed Obligation to Income Ratio) is the share of your monthly income that can go toward EMIs. Most lenders cap it at 40%–50% of net monthly income, including the new loan.
Worked example: Net monthly income ₹80,000, existing EMI ₹10,000, lender FOIR cap 50%.
- Maximum total EMI allowed: ₹80,000 × 50% = ₹40,000
- Already committed: ₹10,000
- Room for a new EMI: ₹30,000/month
Other Factors
- Employment stability: longer tenure at your current employer, and salaried vs. self-employed status, both affect risk assessment.
- Age vs. tenure: lenders generally want the loan repaid before you turn 60–65 (salaried) or 65–70 (self-employed), which caps your maximum tenure as you get older.
- Bank vs. NBFC vs. fintech: banks usually offer the lowest rates but the strictest criteria; NBFCs and fintech lenders are more flexible on documentation but charge more.
How to Improve Your Eligibility
- Pay down or close existing high-EMI loans before applying — this directly raises your FOIR headroom.
- Formalize additional income sources (bonus, rental income) with documentation.
- Check your credit report for errors and correct them — a wrongly-reported default can knock 50+ points off your score.
- Add a co-applicant with steady income to boost combined eligibility.