How Many EMIs Are Too Many?

It’s not about the number, it’s about the ratio.

It's a question many people ask: is there a "magic number" of loans or EMIs that automatically gets you rejected? The short answer is no. A person with one large EMI could be in more financial stress than someone with three smaller ones.

Lenders don't just count your loans. Instead, they focus on a critical metric: the Fixed Obligation to Income Ratio (FOIR), often simplified as the EMI-to-Income ratio.

What is the EMI-to-Income Ratio?

This ratio measures what percentage of your monthly income goes towards paying off existing debt obligations (all your EMIs combined).

(Total Monthly EMIs / Net Monthly Income) x 100

For example, if your monthly income is ₹60,000 and your total EMIs are ₹30,000, your EMI-to-Income ratio is 50%.

Why This Ratio Matters More Than the Number of Loans

Lenders use this ratio to gauge your ability to take on new debt. A high ratio signals that a large portion of your income is already committed, leaving little room for a new loan payment. This makes you a riskier borrower.

Generally acceptable: Below 40%
A cause for concern: 40% - 50%
Often a red flag: Above 50%

The Psychological Factor

Beyond the numbers, having too many loans can also be seen as a sign of poor financial management or being "credit hungry." It raises questions about why you need so much credit at once.

The Bottom Line

Instead of worrying about the number of EMIs, focus on keeping your total EMI outflow at a manageable level relative to your income. If your ratio is creeping up, it might be a signal to pause and reconsider taking on new debt.

Curious about your own situation?

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