Loan eligibility is primarily determined by your net monthly income, existing financial obligations, credit score, and the loan tenure. Lenders typically use the Fixed Obligation to Income Ratio (FOIR) to assess how much EMI you can comfortably afford after accounting for your existing commitments.
FOIR (Fixed Obligation to Income Ratio) is the percentage of your monthly income that goes towards paying existing EMIs and other fixed obligations. Most lenders prefer a FOIR below 40-50%. A lower FOIR means higher loan eligibility since you have more disposable income available for a new EMI.
You can improve your loan eligibility by increasing your income, paying off existing debts to lower your FOIR, opting for a longer loan tenure, adding a co-applicant with a stable income, or improving your credit score. Maintaining a clean repayment history also helps lenders view your application favorably.
Lenders consider various income sources including salary (basic + DA + HRA), business income, rental income, and income from investments. For salaried individuals, the net take-home salary is typically used. Self-employed individuals need to provide ITR and business financials for the last 2-3 years.