Loans
How much EMI can you actually afford?
Not "30% of your salary" — that is a generic rule of thumb, not how an Indian lender actually thinks. Banks and NBFCs size your EMI capacity against your total obligations, not any single new loan in isolation. Here is the real method, worked through with numbers.
By Aman Multani, Founding Partner & Editor · Published 4 September 2026 · Last verified 4 September 2026
The method: FOIR, not a flat percentage
Indian lenders use FOIR — Fixed Obligation to Income Ratio — to size how much EMI you can take on. It measures your total fixed monthly commitments, existing plus proposed, against your income:
FOIR = (Total fixed monthly obligations ÷ Monthly income) × 100
This matters because affordability is never about one loan in isolation. A ₹15,000 EMI is easy to afford on a ₹1,00,000 salary with no other debt, and genuinely difficult on the same salary if ₹35,000 is already going to a car loan and credit card dues. See our full FOIR explainer for how lenders apply the ratio in detail.
What ceiling should you actually use?
Based on published lender guidance, the broad bands most Indian lenders apply are:
| Total FOIR | What it generally means |
|---|---|
| Below 40% | Comfortable — low debt burden |
| 40% to 50% | Balanced, typically acceptable to most lenders |
| 50% to 55% | Upper limit for many banks |
| Above 55% | Approval odds drop sharply |
Rather than picking one number, it helps to see your maximum total EMI capacity at each band, since your own comfort with 40% versus 50% is a real choice, not just a lender's decision.
| Monthly income | Max total EMI at 40% | At 50% | At 55% |
|---|---|---|---|
| ₹30,000 | ₹12,000 | ₹15,000 | ₹16,500 |
| ₹50,000 | ₹20,000 | ₹25,000 | ₹27,500 |
| ₹75,000 | ₹30,000 | ₹37,500 | ₹41,250 |
| ₹1,00,000 | ₹40,000 | ₹50,000 | ₹55,000 |
A worked example with existing debt
Someone earning ₹80,000 a month already pays ₹15,000 rent, a ₹9,000 car EMI and ₹3,000 in credit card minimum dues — ₹27,000 total, a current FOIR of 33.8%.
| Target ceiling | Max total EMI | Headroom for a new EMI |
|---|---|---|
| 40% (comfortable) | ₹32,000 | ₹5,000/month |
| 50% (balanced) | ₹40,000 | ₹13,000/month |
The gap between these two numbers — ₹8,000 a month of headroom — is the practical difference between "what a bank might approve" and "what leaves genuine breathing room." Whichever you pick, the existing ₹27,000 is subtracted first; a new loan is only ever sized against what is left over, never against income alone.
What counts toward the ₹27,000, and what doesn't
- Counts: existing loan EMIs of every kind, credit card dues (usually the minimum due or a set percentage of the balance), and rent for many salaried applicants.
- Usually excluded: statutory deductions like provident fund, and voluntary savings such as SIPs, RDs and FDs — these are commitments you could stop, not obligations you must keep paying.
If you are carrying a credit card balance and paying only the minimum, that minimum due counts as a real obligation against your FOIR — and it can be a larger, more persistent drag on your borrowing capacity than the balance itself suggests. See what paying only the minimum actually costs, or run your own balance and rate through the credit card minimum due calculator, before assuming it is a small line item.
DTI: a simpler, lender-agnostic check
FOIR is the specific ratio lenders apply during underwriting. If you want a quicker, more general read on your overall debt burden — not tied to a specific loan application — our DTI calculator gives you that same total-obligations-over-income idea in a simpler form, useful for a personal check-in even when you are not actively applying for anything.
Common questions
Is there one correct FOIR ceiling?
No. It is lender-specific and can range roughly 40-55% depending on income band and policy. Treat these bands as general guidance, and confirm the specific lender's ceiling before assuming an amount is approved.
Does a higher salary mean a higher FOIR ceiling?
Often, yes — some lenders allow a higher ratio for higher earners, since more absolute rupee income remains after the EMI even at the same percentage. This varies by lender and is not universal.
Should I use gross or net income for this calculation?
Lenders differ — some use gross monthly income before deductions, others use net take-home. This single choice can materially change your result, so ask your specific lender which basis they use.
What if I want to be more conservative than any lender requires?
That is a reasonable choice, not an unusual one. Sizing your own comfort at 30-35% FOIR, below even the "comfortable" band, is a common and sensible approach if you value a larger monthly buffer over a larger loan.
Educational information only, not financial advice. Found an error? Tell us and we will correct it with a dated note.