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Decoded: How banks calculate your maximum personal loan amount

Key Takeaways

Banks use different methods to calculate your personal loan eligibility.
The maximum personal loan that you can get depends on key eligibility criteria like income, credit score, existing debts, etc.
If the approved loan amount is lower than expected, you can enhance your eligibility to qualify for a higher amount.
A FIRSTmoney personal loan from IDFC FIRST Bank can be a good choice for getting the funds you require up to ₹15 lakh.

26 Nov 2025 by Team FinFIRST

How Banks Calculate Your Maximum Personal Loan Amount

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Ever seen a message saying “Get a personal loan of ₹5 lakh in two minutes” just when you’re short on funds? It feels like the perfect solution - until you're approved for a maximum personal loan amount of just ₹3 lakh.

What happened? Where did the other ₹2 lakh go?

This gap often confuses borrowers. But it doesn’t mean something went wrong with your personal loan approval. It simply reflects your personal loan eligibility.

Banks evaluate multiple risk factors to assess your eligibility criteria and calculate the loan amount you qualify for. In this article, we’ll break down how that number is decided, why it may fall short of your expectations, and how you can bridge the gap effectively.

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Methods used for calculating the maximum personal loan

Banks don’t factor in how much loan you want. Instead, they assess how much you can realistically repay when calculating the maximum personal loan that can be sanctioned. While there are multiple ways to assess the loan amount, two of the most common calculations are:

● The multiplier method

Under this simple method, banks use a multiple of your monthly income to determine the maximum loan amount. For instance, if the multiplier is 15X and your monthly income is ₹50,000, you can be eligible for a loan of up to ₹7.5 lakh.

The multiple is fixed by the bank after assessing your personal loan eligibility qualifications.

● The Fixed Obligations to Income Ratio (FOIR) method

This method measures your existing debts against your monthly income. The value that you get is the FOIR.

For instance, if you have a monthly income of ₹50,000 and you’re already paying an EMI of ₹10,000, the FOIR is 20%.

A low FOIR, within 40%, is considered healthy and increases your chances of qualifying for a higher loan amount. However, if the FOIR is high, your eligible loan amount reduces.

While these methods help banks determine the maximum personal loan amount you are eligible for, the approved funds can still differ from what you expect. Here’s why.

Amount expected vs. amount approved: How do they differ?

It’s not uncommon to be offered a lower maximum personal loan amount than what you were hoping for. While you may have a figure in mind based on your needs, banks rely on specific parameters to determine how much they can safely lend you. This isn’t just about caution; it’s about ensuring you can repay the loan comfortably without straining your finances.

Here are a few factors that influence the final approved loan amount:

● Occupation

While personal loans are available to both salaried and self-employed individuals, your employment type impacts how banks assess your repayment ability. Salaried borrowers with steady jobs, especially in reputed, established organisations, are often considered lower risk due to predictable income.

Self-employed individuals can also qualify for high loan amounts, but they may need to provide stronger financial proof or a longer track record to support their repayment capacity.

● Income

Your income directly affects the maximum personal loan amount you’re eligible for. A higher income typically translates to better repayment capability, making lenders more confident in approving a larger amount. Conversely, a lower income may limit the loan size, especially if your fixed obligations already take up a significant portion of it.

● Existing debts

If you’re already paying EMIs for loans or have significant outstanding credit card dues, it reduces your disposable income. This impacts your loan eligibility since lenders prioritise borrowers who don’t appear financially overextended.

● Credit score

A credit score reflects your financial behaviour – how responsibly you’ve managed loans and credit in the past. It factors in your repayment history, credit utilisation ratio, number of open accounts, and the length of your credit history. A score above 750 is generally considered good and improves your chances of a higher loan approval. A low score, on the other hand, may restrict your loan amount or lead to higher interest rates.

For a FIRSTmoney personal loan by IDFC FIRST Bank, you are eligible with a CIBIL score starting at 710.

● Age

Your age can play a surprisingly important role in the maximum personal loan amount you qualify for. Younger applicants may have limited credit history or lower income levels, which can affect loan eligibility. On the other hand, older individuals nearing retirement may be offered shorter repayment tenures to ensure the loan is repaid during their working years.

Lenders generally look for age profiles that align with stable earning potential and a reasonable repayment window.

● Relationship with the bank

If you’re an existing customer with a solid track record, like maintaining savings or salary accounts or repaying previous loans responsibly, you may be offered better terms. A strong banking relationship builds trust and can help boost your approved loan amount.

Two borrowers, two outcomes: Why loan amounts differ

Meet Ramesh and Ankit – both urgently needed ₹5 lakh. Ramesh wanted to renovate his home, while Ankit needed funds for his sister’s wedding. They applied for a personal loan with similar timelines, but the results were very different.

Here’s a quick comparison of their profiles and choices:

Factor	Ramesh	Ankit
Occupation	Salaried (private company, four years)	Self-employed (freelancer, two years)
Monthly income	₹60,000	₹55,000
Existing obligations	One EMI of ₹5,000	Two EMIs totalling ₹15,000
Credit score	770	685
Credit history	5+ years with consistent repayment	Less than 2 years, a few delays
Documents submitted	Income slips, Form 16, address proof	Bank statements only
Loan amount approved	₹4.75 lakh	₹3 lakh

*The above example is for illustrative purposes only

Despite similar incomes, Ramesh qualified for a loan amount much closer to his requirement. His stable job, low FOIR, strong credit history, and clean documentation helped increase his maximum personal loan eligibility.

The good news? You can improve your loan prospects, too.

How to increase the maximum loan amount

Now that you know why your sanctioned loan may fall short, here’s the good news – there are practical ways to boost your eligibility and get a higher maximum personal loan.

Here’s how:

Build and maintain a high credit score through timely repayments and low credit utilisation.
Opt for a longer repayment tenure to reduce EMIs and improve your FOIR.
Repay or consolidate existing debts to free up income and lower your financial obligations.
Provide complete and accurate documentation to speed up processing and improve your credibility.
Avoid frequent job switches before applying, as employment stability increases lender confidence.
If your bank allows, adding a financially strong co-applicant can significantly raise your loan limit

FIRSTmoney personal loan: Fast, flexible, and designed for you

Looking for a loan that aligns with both your needs and your eligibility? The FIRSTmoney personal loan from IDFC FIRST Bank is designed to offer high-value funding with simple, transparent terms, making it easier to access the amount you need, when you need it.

Here’s why it stands out:

Interest rates starting at just 9.99% p.a.
Maximum personal loan amount of up to ₹15 lakh
Get up to ₹15 lakh instantly
Choose flexible loan tenures from 9 to 60 months
No documentation – you only need your PAN and Aadhaar number for application and need to show physical PAN card for video KYC
100% digital application with quick video-KYC
Funds disbursed in as little as 10 minutes
Access multiple loans, anytime, anywhere
Zero foreclosure charges – close the loan at your convenience without any penalties

Eligibility for the FIRSTmoney personal loan is simple and inclusive. Whether you’re salaried or self-employed, you can apply as long as you’re between 21 and 60 years of age and have a CIBIL score of 710 or above.

Once eligible, here’s how to get a FIRSTmoney personal loan in a few quick steps:

Click on “Apply Now”
Register with your mobile number
Confirm basic details to check your eligibility
Choose loan details like amount, tenure, and link your bank account for disbursement
Complete video-KYC by showing your physical PAN card
Once verified, the loan amount is credited as quickly as within 10 minutes

Choose smart for smarter borrowing

A little awareness can go a long way when applying for a personal loan. By understanding the factors that influence your eligibility and applying the right strategies, you can increase your chances of getting the maximum personal loan to match your needs.

If you're looking for a loan that balances flexibility with simplicity, explore the FIRSTmoney personal loan from IDFC FIRST Bank for a reliable option that fits your needs.

Frequently Asked Questions

How can I increase my personal loan eligibility?

You can increase your loan eligibility by adding a co-applicant (if the borrower allows), increasing your credit score, clearing off existing debts, or choosing a longer repayment tenure.

Will closing my home loan increase the personal loan amount?

Yes, closing your home loan can increase the maximum personal loan amount you qualify for. This is because if you close your existing debts, like a home loan, you free up your income. This improves your FOIR and increases your eligibility, helping you secure a higher personal loan.

What is the maximum personal loan I can get?

The maximum personal loan amount depends on factors like your income, occupation, existing debts, credit score, and credit history. Banks typically use methods like the multiplier or FOIR to calculate eligibility. With a strong financial profile, you can qualify for amounts of up to ₹10 lakh with lenders like IDFC FIRST Bank.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.