How Loan Eligibility is Calculated
Banks determine your loan eligibility based on your repayment capacity. The key factor is your Fixed Obligations to Income Ratio (FOIR), which typically should not exceed 50-60%.
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Eligibility Formula
Eligible Loan = (Available EMI × ((1+r)^n - 1)) / (r × (1+r)^n)
Where Available EMI = (Income × FOIR%) - Existing EMI
Factors Affecting Loan Eligibility
- Income: Higher income = Higher eligibility
- Existing Debts: Lower existing EMI = More available for new loan
- Credit Score: 750+ score improves approval chances
- Age: Affects maximum tenure available
- Employment Stability: 2+ years in same job preferred
- Company Profile: MNC/PSU employees get better terms
Tips to Maximize Loan Eligibility
- Close existing small loans before applying
- Add co-applicant's income (spouse/parent)
- Choose longer tenure to reduce EMI burden
- Maintain credit score above 750
- Include all income sources (rental, bonus, etc.)
- Apply through preferred employer tie-ups