Salary heavy on reimbursements? You may not get the loan or credit card you want

So, what went wrong?

Well, your friend’s salary probably has a higher share of fixed income, while yours is packed with reimbursements. This seemingly minor detail could make a big major difference on your eligibility for a loan or a credit card.

How does this work?

While the two CTCs are the same, lenders don’t treat all components equally. Reimbursements such as fuel, mobile bills, meal coupons or travel expenses are included in your CTC, but these are conditional and variable in nature. This means banks typically exclude them when calculating your actual income for a loan or credit card.

Firoz Hasnain, chief general manager – MSME & retail, Punjab National Bank (PNB), said, “The regularity of income of the borrower(s) should be clearly established before sanction of loan. Reimbursement, being variable, is excluded from this assessment.”

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This distinction between fixed and variable income is critical because banks want assurance that the income used to service the loan will remain consistent over its tenure.

Haisnain said lenders usually rely on your latest salary slips, Form 16, and income tax returns (ITRs) to assess your repayment capacity. So if your CTC is ₹15 lakh but ₹3 lakh of that is reimbursements, you’re effectively seen as earning only ₹12 lakh of stable income.

Credit cards, too

This matters not just for loans but credit cards as well. Suppose there’s a premium credit card that requires an annual income of ₹15 lakh. If a chunk of your salary comes from reimbursements, you might be rejected even if your CTC meets the threshold.

“Lenders primarily consider fixed salary while evaluating new credit card applications and setting credit limits,” said Adhil Shetty, CEO, BankBazaar.com. “Reimbursements, being conditional and variable, are not treated as part of your core income.”

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Shetty added that most lenders prefer CTCs with 70-80% fixed components such as basic salary, house rent allowance (HRA), and special allowance. Private-sector lenders may even require fixed income be at least 75% of the total package to consider it stable enough for long-term obligations.

“A higher fixed-income share signals stability,” he said. “It makes you eligible for a larger loan and may even help you secure better interest rates.”

Some exceptions

Not all reimbursement component are treated as equal. Lenders view some more favourably than others, particularly recurring ones such as mobile or fuel allowances. “Reimbursements that are recurring, necessary, and verifiable are sometimes partially considered,” Shetty said. But this is rare, and the default approach is to exclude them.

Other factors that play a role

“While salary structure plays a role in internal assessment, your credit score remains one of the most important factors for loan or credit card eligibility. A better score allows for better terms and increases your changes of an approval,” said, Bhushan Padkil, senior vice president & head – DTC at TransUnion CIBIL. Credit scores don’t take into account your income structure – they rely solely on your credit behaviour, such as repayment history and how much of your credit limit you use.

The fixed obligations to income ratio (FOIR) is a key parameter lenders use to assess whether you can service a loan. This is the proportion of your existing loans to your income. 

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For instance, say a salaried professional earns a fixed monthly income of ₹1,00,000. He pays ₹25,000 in existing EMIs, one for a car loan and another for a personal loan. Now, he is applying for a home loan. The banks will calculate FOIR by taking the sum of all fixed monthly obligations (EMIs) and dividing it by the net monthly income. In this example, FOIR is 25%.

“Generally, a FOIR of up to 60-65% is acceptable to lenders,” said Sarvjit Singh Samra, managing director & CEO of Capital Small Finance Bank. Even if you have a higher fixed-obligations component, your FOIR may cross the acceptable limit, reducing the chances of your loan being approved or resulting in a smaller loan amount. 

Another factor, Samra said, is the loan to value (LTV) ratio. For instance, a home loan of ₹45 lakh against a property worth ₹60 lakh results in an LTV ratio of 75%. A lower LTV further enhances your creditworthiness.

Salaried or freelancer?

Akshay Aedula, product and growth, CRED, said, “Access to credit can vary even among individuals with the same income. That’s because income is just one of several factors lenders consider when assessing your eligibility.”

A long history of timely repayments can improve your chances, he added, while limited or no credit history may create barriers, even if your income is high. High existing debt, such as loans or outstanding credit card dues, can signal repayment strain and lower your eligibility.

“Employment stability also matters. Salaried individuals with steady jobs often face fewer checks than freelancers or self-employed applicants with similar earnings. Using a large share of your available credit can also work against you, regardless of income or credit score,” Aedula said.