- Multiple EMIs reduce income available for new loans.
- High Fixed Obligation to Income Ratio lowers loan eligibility.
- Secured loans are viewed more favorably than unsecured.
Managing multiple EMIs has become quite common today. From home loans to personal loans and credit cards, you may be handling several obligations at once. But when you apply for a new loan, lenders look beyond your repayment history. They assess your overall financial position. Even with a strong track record, too many EMIs can affect your eligibility.
Role of existing EMIs
Every EMI reduces your available monthly income. A few commitments may be manageable, but too many can stretch your finances. Lenders do not look at timely payments alone. They also check whether you can comfortably take on additional debt. If a large share of your income is already committed, it leaves little room for new repayments. This can raise concerns, even if you have never missed a payment.
Importance of FOIR in loan decisions
A key metric lenders use is the Fixed Obligation to Income Ratio (FOIR). It shows how much of your monthly income goes towards EMIs and fixed expenses. In most cases, lenders prefer this ratio to stay within the 40% to 50% range. As your EMIs increase, this ratio rises. This reduces your ability to take on new debt. Even with stable income, a high FOIR can lower your chances of approval. Lenders use this to ensure your borrowing remains sustainable.
The type of loan also makes a difference
Not all EMIs are treated the same. Unsecured loans, such as personal loans, credit card debts, or BNPL, are viewed more cautiously as they carry higher interest and reflect short-term borrowing. Secured loans, like home loans, are seen as more stable. A higher share of unsecured EMIs can make lenders more cautious, even if your total EMI amount appears manageable.
How lenders differ in their approach
Loan assessment can vary across institutions. Banks usually follow stricter norms. They maintain tighter FOIR limits and focus strongly on income stability and credit score. Non-banking financial companies (NBFCs) may be more flexible. They can allow slightly higher FOIR levels or consider alternative income patterns. However, this often comes at a higher interest cost. Approval may be easier, but borrowing could become more expensive.
Steps you can take to improve eligibility
If your EMIs are affecting your eligibility, a few steps can help. Reducing existing debt is the most effective approach. Closing smaller loans or prepaying high-interest obligations can improve your repayment capacity. Avoid taking new short-term credit unless necessary and keep unsecured borrowing in check. Regularly reviewing your obligations can help you stay within comfortable limits.
Having multiple EMIs is not always a problem, but it does influence how lenders assess your application. The focus is on whether your income can support your total commitments without strain. By managing your EMIs carefully and keeping your finances balanced, you can improve your chances of approval. A disciplined approach today can make accessing credit easier when you need it.
(The author is Associate Analyst, Communications, BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
