When applying for a personal loan in India, your salary plays a key role in determining whether your application will be approved, how much you can borrow, and at what interest rate. Whether you’re salaried or self-employed, banks use your income as a benchmark to assess creditworthiness and repayment ability.
In this blog, we’ll break down how your salary impacts your loan eligibility and what the term FOIR (Fixed Obligation to Income Ratio) means in simple terms.
📌 Why Does Salary Matter in Loan Approval?
Banks and NBFCs want to ensure that you have the capacity to repay the loan without falling into a debt trap. That’s why they consider:
- Your monthly salary or income
- Existing EMIs or financial obligations
- FOIR (Fixed Obligations to Income Ratio) – the core deciding factor
🧮 What Is FOIR and Why Is It Important?
FOIR stands for Fixed Obligation to Income Ratio. It is a formula banks use to measure how much of your monthly income is already being used for other fixed payments like EMIs, rent, or credit card bills.
Formula:FOIR = (Total Fixed Obligations / Net Monthly Income) × 100
Most banks require your FOIR to be under 50-60% to approve a new personal loan.
💡 Example:
If your salary is ₹30,000/month, your total EMI obligations shouldn’t exceed ₹15,000/month to stay within a 50% FOIR.
📉 Low Salary = Higher Risk, Higher Interest
If your monthly income is on the lower side:
- You might face stricter eligibility checks
- Get approved for a lower loan amount
- Pay higher interest rates due to perceived risk
💼 Example:
Someone earning ₹20,000/month may get a loan of ₹50,000–₹1,00,000 with a 15–24% interest rate, depending on credit score and lender.
📈 High Salary = Better Terms
If your income is higher:
- You’re more likely to get quick approval
- Enjoy lower interest rates
- Get access to higher loan limits
💼 Example:
With a ₹75,000/month salary and no existing EMIs, you could qualify for loans up to ₹10–12 lakhs at 10–13% interest.
✅ Pro Tips to Improve Your Loan Eligibility
- Maintain a good CIBIL score (750+)
- Limit your existing EMIs to keep FOIR under control
- Choose a longer tenure to reduce monthly EMIs
- Apply with a co-applicant to improve loan eligibility
🗣 Need Help with Your Loan Eligibility?
If you’re unsure whether you qualify for a loan based on your salary or FOIR, drop a comment below or reach out directly, and we’ll guide you through the best options.
🔖 Conclusion
Your salary is more than just a number—it’s the foundation of your personal loan approval process. Understanding how FOIR works and managing your obligations smartly can significantly improve your chances of getting the loan you need.