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Occasionally, situations arise in life where we find ourselves needing to take out a loan. An even more challenging situation occurs when, while still repaying an existing loan, we need to take out a new one. But is it actually possible to secure a new loan despite already having an outstanding one? The simple answer is 'yes.' However, a bank won't simply grant you a new loan without proper scrutiny. Let's understand the entire process involved.

**What Does the Bank Look For?**
When a bank or an NBFC (Non-Banking Financial Company) evaluates your loan application, your salary serves merely as a starting point. What truly matters, in reality, is how much disposable income remains with you after meeting all your existing financial obligations.

Experts explain that lenders examine your total monthly income and deduct all your existing EMIs—including those for home loans, car loans, personal loans, and credit cards—from that figure. The remaining amount constitutes the income available to you for servicing a new loan.

**What Does the Bank Expect?**
The residual amount left over from your salary forms the basis for determining whether or not you are eligible to take out a new loan. Essentially, banks generally require that your total monthly financial obligations (including the EMI for the loan you are currently applying for) do not exceed 50–60% of your total income.

The bank seeks assurance that you will be able to repay the installments for the new loan without defaulting on your existing loans. They also advise borrowers to be completely transparent regarding all their existing EMIs, as concealing one's financial liabilities can lead to the rejection of the loan application or even result in legal complications.

**Eligibility is Assessed via the FOIR Ratio**
Banks calculate the FOIR (Fixed Obligation to Income Ratio). This metric reveals what proportion of your income is already being utilized to pay off existing EMIs. It plays a pivotal role in determining whether or not you will be granted a new loan.

A healthy FOIR is considered to be anything below 50%. Suppose you earn ₹50,000 per month and are already paying ₹20,000 in EMIs; in this scenario, your FOIR stands at 40%, which is considered a healthy level.

However, if taking out a new loan causes your total EMI burden to rise to ₹32,500, your FOIR will jump to 65%. Lenders would not view this ratio favorably, and your loan application could be rejected.

**NBFCs May Offer Loans, But at a Higher Cost**
NBFCs may be willing to extend loans even at higher FOIR levels. They might approve a new loan even if your FOIR is between 60% and 65%. However, this comes at a high cost—specifically, you will be charged a higher interest rate. Therefore, if you ever consider taking a loan from an NBFC in such a situation, it is crucial to perform thorough financial calculations beforehand.

**Does Your Credit Score (CIBIL) Make a Difference?**
Experts point out that while a good credit score is essential, it cannot alleviate your existing EMI burden. A credit score of 750 or higher improves your chances of loan approval and helps secure better interest rates; however, the actual amount of the new loan you can avail is ultimately determined by your FOIR and your repayment capacity.

In the eyes of lenders, your existing EMIs effectively serve as your financial report card. While a high income may open doors for you, and a strong credit score may bolster your case, it is ultimately your existing financial liabilities that determine how much additional debt you can take on.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.